MW: Crude surrenders gains as supply worries pile up
Crude oil prices surrendered earlier gains on Wednesday, as most traders expected the U.S. Federal Reserve to raise interest rates later in the day, which would buoy the greenback and make crude imports more expensive for buyers paying with foreign currencies.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in January CLF6, -0.83% dropped 61 cents, or 1.6%, to $36.74 a barrel. January Brent crude LCOF6, -2.34% on London’s ICE Futures exchange fell 92 cents, or 2.4%, to $37.53 a barrel.
“The focus this week is the Fed’s decision. If the expectation of a rate hike is realized, it will show the U.S. economy is doing well. But given the bearish outlook on the global economy, it could be an isolated case,” said Vyanne Lai, an energy analyst at National Australia Bank.
Expectations that the U.S. Congress will lift a 40-year ban on U.S. crude oil exports in the near term is also weighing heavily on prices. While abolishing the ban bodes well for U.S. shale producers, an increase in oil supply in the global market will likely exacerbate weakness in the already inundated market, analysts say.
“If the U.S. Congress lifts the ban on U.S. crude exports, it will weigh on Brent prices but allows U.S. crude to gain new turf,” said an Australia-based energy analyst.
According to the API estimate, U.S. crude stockpiles likely grew by 2.3 million barrels for the week ended Dec. 11. The official data by the Energy Information Administration will be issued on Wednesday.
Nymex reformulated gasoline blendstock for January RBF6, +0.56% — the benchmark gasoline contract — fell 0.3% to $1.24 a gallon, while ICE gasoil for January changed hands at $338.25 a metric ton, down $7.50 from Tuesday’s settlement.
