Oil Moves Higher Ahead of Fed Decision

NEW YORK (DTN) -- New York Mercantile Exchange oil futures moved higher Wednesday morning along with rising equities as the dollar weakened on expectations the Federal Reserve would delay raising interest rates until next year since U.S. economic data have been mixed recently.

The market is also waiting for oil data from the Energy Information Administration due out at 10:30 AM ET that’s expected to show a build for crude oil inventories and draws for refined products.

At 8 a.m. CDT, NYMEX December West Texas Intermediate futures rose 39 cents to $43.59 bbl, rebounding from Tuesday’s two-month spot low of $42.55. The ICE December Brent futures contract was up 29 cents at $47.10 bbl after bouncing off Tuesday’s 1-1/2 month spot low at $46.41.

In products trade, NYMEX November ULSD futures rose 1.49 cents to $1.4393 gallon while NYMEX November RBOB futures were up 1.08 cents to $1.2980 gallon, with the November products contracts set to expire on Friday.

On Wall Street, U.S. stock indices were higher across the board as investors await a U.S. Federal Reserve decision on interest rates later Wednesday afternoon as well as the advanced reading of third quarter U.S. gross domestic product on Thursday.

The Federal Open Market Committee, which has been meeting since Tuesday, will release its policy statement at 1 p.m. CDT. It comes a day after the Conference Board of New York said consumer confidence fell to a four-month low in October, while the Case-Shiller 20-city home price index rose 5.1% year-over-year in August as expected after July's 4.9% increase.

On supply, the American Petroleum Institute late Tuesday reported a larger-than-expected build in domestic crude supplies, while the gasoline supplies declined less than expected and the draw in distillates stockpiles was above analysts' average projection.

API said U.S. commercial crude stocks climbed 4.1 million barrel in the week ended Oct. 23, twice forecast for a 2.0 million bbl build. If confirmed by EIA, it would be the fifth straight weekly crude stock build after inventories rose by a combined 22.7 million bbl during the four prior weeks.

On products, API also reported a roughly 700,000 bbl decrease in gasoline supplies, below estimates for a draw of 1.3 million bbl. API also said distillate inventories fell 2.6 million bbl versus an expected draw of 2.2 million bbl. Refinery runs were up 1.9% to 87.8% of capacity.

Also, weighing on the market tangentially is news Congress and the White House have agreed to sell oil from the Strategic Petroleum Reserve, adding to an already oversupplied market. The U.S. government will sell 8% of its 695 million bbl of crude oil from SPR over the next few years.

George Orwel can be reached at george.orwel@telventdtn.com