Oil Higher in Wednesday Trade

WASHINGTON, D.C. (DTN) -- New York Mercantile Exchange oil futures nearest delivery and the Brent contract on the Intercontinental Exchange shifted higher Wednesday morning, reversing from Tuesday's more than one-year low settlements ahead of a key decision by the U.S. central bank on rate policy in 2019 and weekly supply data from the Energy Information Agency.

In midmorning trade, Nymex January West Texas Intermediate futures were up $0.76 at $47 barrel (bbl), after losing 7% in value during Tuesday trading session. ICE February Brent futures advanced $0.52 to trade near $56.78 bbl, after registering a 14-month spot price settlement low during the previous session. Nymex January ULSD futures bounced back 3.35 cents to a $1.7874, while Nymex January RBOB futures gained 2.14 cents to a $1.3673 gallon.

The Energy Information Agency is set to release its weekly supply report at 10:30 a.m. ET, which will be closely watched by the markets. Oil futures were hard pressed by bearish data from EIA's Drilling Productivity report released Monday that projects U.S. shale production to increase by 134,000 barrels per day (bpd) in seven U.S. regions from December to January totaling 8.166 million bpd.

Bearish sentiment in the market was also amplified by the latest report for crude released late Tuesday afternoon by the American Petroleum Institute. API said commercial crude inventory increased 3.45 million bbl during the week profiled, which ran counter to expectations for a draw of about 3.0 million bbl. API also reported a 1.77 million bbl build in gasoline inventory which was above a market consensus for a 1.0 million bbl increase.

As the Federal Open Market Committee is in the second day of two-day meeting to debate interest rate policy for 2019, the Dow Jones Industrial Average and S&P 500 Index are on track for the worst December since the Great Depression despite early gains, losing 1,000 points in two consecutive sessions on Friday and Monday. The steep selloff in the stock market is signaling the Feds should hold rates flat, as many investors believe that raising borrowing costs would adversely affect economic growth in the United States.

The world economy has already showed signs of a slowdown, with recent data from China and the European Union detailing a further decline in key economic sectors in November including industrial and manufacturing while the weakness is spreading into retail sector. The slowdown is partly caused by the U.S.-China trade dispute, with uncertainty looming in 2019 over the outcome from the current 90 days truce in trade war between the world's two largest economies.

Liubov Georges can be reached at liubov.georges@dtn.com