Oil futures rallied on Wednesday after U.S. government data revealed a big weekly drop in crude supplies and the Federal Reserve maintained the pace of its bond purchases.
October crude oil rose $2.65, or 2.5%, to settle at $108.07 a barrel on the New York Mercantile Exchange. Prices, which fell 1.1% in the previous session, traded at $105.73 before the government’s supply data and at $107.02 before the Fed announcement.
Then, the Fed surprised investors and said it would not taper its $85-billion-a-month in bond purchases for now, with Fed Chairman Ben Bernanke saying that economic data since June did not support a reduction in buys.
“The decision by the Fed not to taper has immediately manifested itself in further gains for oil today — after a rally was kick-started by a bullish inventory report — as a weaker dollar and ongoing stimulus is viewed as supportive for oil prices,” said Matt Smith, commodity analyst at Schneider Electric, in emailed comments.
The EIA data came in contrast to a much smaller-than-expected crude supply decline reported by the American Petroleum Institute late Tuesday. The API reported a roughly 252,000-barrel fall. The EIA said gasoline supplies fell 1.6 million barrels, while distillate stockpiles were down 1.1 million barrels. Gasoline stockpiles were expected to be unchanged, while forecasts called for an increase of 1 million barrels for distillates.
On Nymex, October gasoline rose 8 cents, or 3%, to settle at $2.74 a gallon, and October heating oil was up 4 cents, or 1.4%, at $3.04 a gallon.
November Brent crude, the European benchmark, gained $2.41, or 2.2%, to $110.60 a barrel, following a 1.7% drop Tuesday on ICE Futures.
Commerzbank said Brent oil would see some support from Libyan outages and the lingering possibility of a U.S. attack on Syrian government targets.
“The still numerous supply outages and the residual risk of a renewed escalation of the Syrian crisis are likely to preclude any sharper fall in prices, so we do not envisage any prolonged price slide,” Commerzbank analysts wrote in a recent note.
In other futures trade, October natural gas settled down 3 cents, or 0.8%, to $3.71 per million British thermal units. The contract had risen 0.2% Tuesday after a 1.7% rally Monday.