MW: Oil gives back some gains ahead of Fed decision
Oil prices fell Thursday, on the heels of big gains, as market participants grew wary ahead of the U.S. Federal Reserve’s decision on interest rates.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in October CLV5, -1.38% moved under $47 a barrel, dropping 62 cents, or 1.3%, to $46.54 a barrel. November Brent crude LCOX5, -1.67% on London’s ICE Futures exchange fell 66 cents, or 1.3%, to $49.07 a barrel.
Most traders are keeping a close eye on the outcome of the Federal Reserve meeting, with the expectation the central bank will stand pat on interest rates due to continuing concerns about the global economy and recent volatility in Chinese equity markets. Softer U.S. inflation data released Wednesday may also make a rate increase less likely.
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Oil prices ended sharply higher Wednesday after an unexpected drop in U.S. crude stockpiles, with Nymex crude gaining 5.74% to $47.15, the highest settlement value since Aug. 31. Brent crude also rose for the second consecutive session yesterday, ending up $2 at $49.75.
However, both Nymex and Brent were still down by about 11% and 13%, respectively, year-to-date.
Late Wednesday, the U.S. Energy Information Administration’s data showed crude stockpiles fell by 2.1 million barrels last week, compared with analysts’ forecast of a 1.1-million-barrel increase. The same report also showed refineries increased operating rates to 93.1% for the first time since July. A higher refinery operating rate points to more crude demand for processing into petroleum products.
While the reports of decreasing U.S. stockpiles are encouraging, many analysts say the problem of a lingering global glut is far from over as key members of the Organization of the Petroleum Exporting Countries still aren’t committed to making a drastic cut in output.
“In our view, non-OPEC producers have already taken action to limit their own supply. We see the global surplus as increasingly a function of excess OPEC supply that OPEC needs to be responsible for addressing,” said Tim Evans, an energy analyst at Citi Futures.
“Otherwise, oil prices will have to be lower for longer,” he added.
Nymex reformulated gasoline blendstock for October RBV5, -0.88% — the benchmark gasoline contract — fell 0.6% to $1.3745 a gallon, while October diesel traded at $1.5471, 57 points higher.
ICE gasoil for October changed hands at $475.50 a metric ton, down $1.50 from Wednesday’s settlement.
