Oil Pushes Higher as US Dollar Nosedives on Powell's Testimony

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- New York Mercantile Exchange oil futures and Brent crude traded on the Intercontinental Exchange powered higher in the afternoon session Wednesday. The gains came as investors parsed through comments from Federal Reserve Chairman Jerome Powell to the House Financial Services Committee amid concerns over the impact of tighter monetary policy on oil demand.

U.S. dollar index fell 0.44% against global peers to finish the session at a 101.676 six-week low after Powell assured lawmakers on Capitol Hill that pausing rate increases at the June 14 Federal Open Market Committee meeting is nevertheless consistent with lifting them later this year depending on incoming inflation data. Investors judged the comments could signal that the central bank is still data dependent and could pause rates altogether should the data warrant such a move.

The Fed last week left the federal funds rate unchanged in a 5% to 5.25% target range but indicated that more rate hikes are likely needed before the end of the year to cool excessive demand.

Government figures released Tuesday showed new home construction starts jumped 21.7% month-over-month to a 1.63 million annualized rate, while applications to build, a proxy for future construction, also climbed 5.2% to an annualized rate of 1.49 million units. After the report, the Atlanta Fed GDPNow forecast residential investment would add slightly to U.S. gross domestic product estimates for the second quarter. Homebuilding last contributed to growth in the first quarter of 2021.

Traders will now turn their focus to existing home sales figures due out Thursday that are expected to show a negative 3.4% print month-over-month as homeowners mostly opt out from moving amid a high interest rate environment.

Also Wednesday afternoon, oil traders positioned ahead of the weekly release of inventory data from the American Petroleum Institute scheduled for 4:30 p.m. EDT, delayed one day due to observance of the Juneteenth holiday in the United States. The U.S. Energy Information Administration will release official inventory data 11 a.m. EDT Thursday.

Analysts estimate U.S. commercial crude oil stockpiles declined by a modest 100,000 barrels (bbl) for the week ended June 16, with expectations ranging from a decrease of 4.2 million bbl to an increase of 2.5 million bbl. The estimates for a decrease come despite a preliminary U.S. Department of Energy report indicating it disbursed another 1.7 million bbl of crude last week from the nation's Strategic Petroleum Reserve. In the prior week, commercial crude oil inventories increased by a massive 7.9 million bbl that lifted stockpiles on par with five-year average. Gasoline inventories are expected to have fallen by 500,000 bbl from the previous week, while stocks of distillates, which are mostly diesel fuel, are expected to have risen by 600,000 bbl. Refinery use likely slipped by 0.1% from the previous week to 93.6% of capacity.

On the session, NYMEX August West Texas Intermediate futures advanced to $72.53 per bbl, up $1.34, and international crude benchmark Brent for August delivery gained to $77.12 per bbl. NYMEX July ULSD futures rallied $0.0888 to $2.5642 per gallon, and NYMEX July RBOB futures gained $0.0149 to $2.6241 per gallon.

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

Liubov Georges