Crude Futures Notch Gains on Stock Draw, Fed Policy Pledge

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Bolstered by a softer U.S. dollar, West Texas Intermediate futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled Wednesday's session higher, with the advance following a pledge from the Federal Open Market Committee to hold accommodative monetary policy in place until substantial further progress is made by the labor market and the broader economy, while acknowledging downside risks to the post-pandemic recovery from the Delta-driven resurgence.

As markets expected, U.S. Federal Reserve left its key benchmark interest rate unchanged at the current target range between 0% and 0.25%, while also keeping intact $120 billion per month in bond purchases, noting the path to a sustained economic recovery "depends on the course" of the pandemic and the pace of vaccinations. Fed officials, however, indicated they have begun discussions on curtailing asset-purchasing programs that have juiced the U.S. economy, but the progress that has been made so far is seen as insufficient to alter bond buying activity by the central bank.

"With progress on vaccinations and strong policy support, indicators of economic activity and employment have continued to strengthen," said the Fed in their updated policy statement upon the conclusion of the two-day policy meeting. "The sectors most adversely affected by the pandemic have shown improvement but have not fully recovered. Inflation has risen, largely reflecting transitory factors. Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses."

Fed officials said they are "prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the committee's goals."

U.S. stocks held steady near all-time highs on Wednesday and the U.S. Dollar Index declined to 92.317 at settlement, supporting the U.S. crude benchmark.

NYMEX September WTI advanced $0.74 for a $72.39 barrel (bbl) settlement, and ICE September Brent contract finished at $74.74 bbl, up a modest $0.26 bbl on the session, while narrowing its premium to the October Brent futures to $0.87. NYMEX August RBOB contract fell 0.59 cents for a $2.3082 gallon settlement and next-month delivery September futures narrowed its discount to the expiring contact to 2.62 cents gallon. NYMEX August ULSD contract gained 1.21 cents to $2.1560 gallon, with September futures near flat with august delivery at $2.1577 gallon. ICE September Brent, and NYMEX August ULSD and RBOB futures expire Friday afternoon.

Further supporting the oil complex, Energy Information Administration's inventory report released midmorning was mostly bullish, showing total crude and petroleum products stocks fell sharply last week, while demand for both gasoline and diesel fuels neared its pre-pandemic 2019 levels. U.S. commercial crude oil stocks tumbled 4.1 million bbl from the previous week to 435.6 million bbl, and now stand 7% below the five-year average. Gasoline inventories decreased by 2.3 million bbl last week to 234.2 million barrels per day (bpd), and now match the five-year average. Demand for motor fuel edged higher for the second consecutive week to 9.325 million bpd, bringing the four-week average to 9.5 million bpd, just slightly below 9.6 million bpd during the comparable four weeks in 2019. Distillate inventories also fell by a larger-than-expected 3.1 million bbl last week to 137.9 million bbl and remain about 5% below the five-year average. Distillate demand advanced for the second consecutive week, gaining 431,000 bpd to 4.356 million bpd. Total commercial petroleum inventories decreased by 6.5 million bbl last week.

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

Liubov Georges