Oil Ends the Day Sharply Higher

NEW YORK (DTN) -- New York Mercantile Exchange oil futures moved mixed Thursday morning with the West Texas Intermediate crude contract rallying as the U.S. dollar plummeted to a five-month low after the U.S. Federal Reserve scaled down its expectation of the number of rate hikes likely this year.

Analysts noted the dovish Fed statement issued Wednesday came on the heels of recent stimulus measures by the European Central Bank, the Bank of Japan and the Peoples Bank of China that have increased liquidity in the market. The oil complex was also supported by U.S. product demand and news a meeting by international producers to support a freeze in production at January output levels is back on the table.

At 9 a.m. ET, NYMEX April WTI crude futures rose 58cts to $39.04 bbl, near a $39.64 3-1/2 month high on the spot continuation chart. May Brent futures traded on the IntercontinentalExchange rose 34cts to $40.67 bbl, off a 3-1/2 month spot high of $41.44.

In products trade, NYMEX April ULSD futures edged 0.20cts higher to $1.2332 gallon, off a 3-1/2 month spot high of $1.2551. April RBOB futures reversed lower, down 0.78cts to $1.4105 gallon, after posting a three-day high of $1.4399.

On Wall Street, equities eased after Wednesday's rally and the dollar index plunged after the central bank on Wednesday said it would keep the federal funds rate unchanged due to global pressures that present risk to the U.S. economy. Fed officials are also forecasting that they would raise rates more gradually this year than they had projected in December, and now foresee two rather than four modest hikes in their benchmark short-term rate during the next nine months.

The Fed said the U.S. economy continued to grow at a moderate pace but the global economy and tighter financial markets still pose risks to the domestic economy. Offsetting this threat, the Fed said it expects a further strengthening in the U.S. jobs market.

Meantime, speculative buying increased on news the Organization of Petroleum Exporting Countries has scheduled a meeting with non-OPEC producers in Qatar on April 17 to iron-out an agreement to freeze production at near-record January output. Fifteen OPEC and non-OPEC countries that account for 73% of global crude oil output are reportedly supporting the initiative, but Iran has made it clear it won't participate until its production is raised to 4.0 million bpd. The output freeze plan was initiated by Saudi Arabia and Russia last month, although some analysts see no material impact on the global oil glut by the action.

On domestic supply, Energy Information Administration data for the week-ended March 11 detailed a 1.3 million bbl crude stock build, falling short of an expected 3.3 million bbl stock gain. EIA said implied gasoline demand was up 47,000 bpd while distillates demand rose 164,000 bpd during the week reviewed.

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