DTN Oil

CRANBURY, N.J. (DTN) -- Nearest delivered oil futures on the New York Mercantile Exchange and Brent on the Intercontinental Exchange slumped to one-week lows Wednesday, accelerating losses in market-on-close trade following the release of minutes from the Federal Open Market Committee's April 30-May 1 meeting on monetary policy.

FOMC minutes show central bank officials were concerned about "a lack of further progress toward the Committee's 2 percent [inflation] target," noting "significant increases in components of both goods and services price inflation."

While some officials suggested seasonal patterns might have skewed inflation readings, leading to the large increases seen earlier in the year, others "emphasized that the recent increases in inflation had been relatively broad-based and therefore should not be overly discounted."

The minutes suggested a cautious committee that would choose to go slow in reducing interest rates despite April's Consumer Price Index released after the FOMC meeting that showed inflation pressure eased last month. Moreover, the committee highlighted the cumulative effect inflation was having on consumers that directly affect discretionary spending and driving demand.

"They also remained concerned that elevated inflation continued to harm the purchasing power of households, especially those least able to meet the higher costs of essentials like food, housing, and transportation," according to the minutes.

CME's FedWatch Tool shows investors continue to expect two 25-basis point cuts to the federal funds rate at FOMC's September and December meetings, but the probability for the second cut in December narrowed to a 52.6% probability from 56.4% on Tuesday. The policy rate is in a 5.25% by 5.5% target range.

The Fed minutes followed a mixed inventory report from the Energy Information Administration showing an unexpected 1.8 million bbl build in commercial crude oil inventory even as refinery crude inputs and exports increased. EIA reported a 227,000 bpd ramp-up in crude inputs to a 16.482 million bpd 18-week high, while crude exports surged 595,000 bpd or 14.4% to 4.73 million bpd.

EIA also reported a 439,000 bpd or 5% jump in gasoline supplied to the U.S. market to an 8 1/2 month high, with stocks down 945,000 bbl to 226.822 million bbl.

July West Texas Intermediate settled down $1.09 at $77.57 bbl, with the July Brent contract ending the session $0.98 lower at $81.90 bbl. Both contracts settled below their 50% Fibonacci retracement points for the December-April uptrend.

June ULSD futures settled $0.0305 lower at $2.4318 gallon, while June RBOB futures settled below the 100-day moving average for the first time since early February, down $0.0422 at $2.4678 gallon.

Brian L. Milne can be reached at brian.milne@dtn.com