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WASHINGTON (DTN) - At the close of trading on Wednesday, the nearest oil futures on the New York Mercantile Exchange and the Brent crude oil traded on the Intercontinental Exchange rose slightly, chasing the stock market higher. After the Federal Open Market Committee signaled the end of the ultra-loose monetary policy earlier than previously expected, post-settlement earnings accelerated, and positive policy changes were made in response to rising inflation.
In addition, the U.S. Energy Information Administration’s bullish inventory report released this morning showed that U.S. oil inventories had fallen sharply, providing additional support.
At the time of settlement, the New York Mercantile Exchange's January West Texas Intermediate crude oil futures rose by US$0.14 to US$70.87 per barrel, and ICE's February Brent crude oil futures rose slightly to US$73.88 per barrel, an intraday increase of US$0.18/barrel. . The January ULSD futures on the New York Mercantile Exchange rose 0.20 cents to close at $2.2204 per gallon, and the January RBOB futures contract rose 1.67 cents to $2.1275 per gallon.
The FOMC concluded its last meeting this year and sent a clear signal to the market that the central bank is preparing to raise short-term benchmark interest rates at least three times next year to cool higher inflation. Prior to the policy change, data in November showed that the consumer price index soared to 6.8% in 12 months, a 39-year high, while wholesale prices reached the highest year-on-year increase of 9.6% on record. In the face of jaw-dropping inflation data, the Fed will purchase $60 billion in bonds each month starting in January, half of the level before the scale-down in November, and a decrease of $30 billion from December purchases.
Most Fed officials now expect an annualized growth rate of 4% of U.S. GDP next year, which is 1.5% lower than the September forecast. They also expect the unemployment rate to fall by 3.5% and the Federal Reserve Funds rate to rise to 0.9%. The forecast for September rose by 0.8%. Three months ago. The core inflation rate in 2020 is now expected to be 2.6%, which is lower than the 4.4% expected in October.
EIA’s inventory report proves that the oil complex is bullish, detailing that US crude oil inventories have fallen more than expected, and refined fuel supplies have unexpectedly fallen. In the week under review, the total oil inventory decreased by 15.9 million barrels, of which only crude oil inventory decreased by 4.6 million barrels. Commercial crude oil inventories stood at 428.3 million barrels, still about 7% below the five-year average.
The further bullish part of the report can be found in the refined fuel complex. Gasoline inventories unexpectedly decreased by 719,000 barrels from the previous week to 218.6 million barrels, while analysts expect inventories to increase by 1.2 million barrels. At the same time, motor gasoline demand soared by 509,000 barrels/day, or 5.6%, to 9.472 million barrels/day, the highest level since the week of October 29.
According to EIA, distillate stocks have also decreased by 2.9 million barrels to 123.8 million barrels, which are now about 9% below the five-year average. Distillate fuels supplied to the US market surged by 1.318 million barrels per day, or 36%, to 4.896 million barrels per day from the previous week. This is the largest implied weekly demand rate of 4.926 million barrels per day since late January 2003, and the total amount of petroleum products supplied to the US market last week reached a record high of 23.191 million barrels per day.
Counteracting some of the bullish effects of the EIA inventory report are concerns about COVID. The World Health Organization warned on Tuesday that the new omicron variant of the coronavirus is spreading faster than any previous strain and may already be in most countries of the world /Region appears. The UK reported its highest daily number of cases since the pandemic began on Wednesday. Domestically, due to a sharp increase of more than 43% in COVID-19 cases across the state since Thanksgiving, New York has re-implemented the task of indoor masks, putting pressure on the healthcare system due to a shortage of personnel.
On Tuesday, the International Energy Agency lowered the forecast of global oil demand for 2021 and 2022 by 100,000 barrels/day, citing the spread of the COVID-19 strain. Day. The IEA warned that new containment measures to slow the surge in COVID-19 cases in the winter will slow the expected recovery in global jet fuel demand, but will not derail it.
You can reach Liubov Georges at liubov.georges@dtn.com
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