WTI futures hold gains after EIA report, Fed meeting in focus

West Texas Intermediate crude rose to the highest in a week as the Energy Information Administration reported US crude inventories fell for a third consecutive week in the seven days to December 13, albeit less than expected, while distillate fuel stockpiles fell and defied projections to remain flat. Market players however remained reluctant to enter big positions ahead of the conclusion of FOMCs two-day meeting, which is expected to provide definitive information on Feds tapering timetable.

On the New York Mercantile Exchange, WTI crude for delivery in February traded at $97.92 per barrel at 16:02 GMT, up 0.46% on the day. Prices shifted in a days range between a session high of $98.26, the highest since December 11, and days low of $97.31. The US benchmark was unchanged on Tuesday and extended its weekly advance to over 1.4% following Wednesdays gains.

Meanwhile on the ICE, Brent futures for settlement in February traded at $109.26 a barrel at 16:04 GMT, up 0.75%. Prices ranged between session high and days low of $109.44 and $107.81 a barrel. The European benchmark lost 0.8% on Tuesday but rose back to positive weekly territory following Wednesday’s rebound.

The oil market maintained gains after the Energy Information Administration reported a third consecutive weekly decline in US crude inventories in the seven days to December 13, despite slightly trailing expectations. Crude oil stockpiles fell by 2.94 million barrels last week, compared to the median estimate of nine analysts surveyed by Bloomberg for a 3.5 million barrels decline. At 372.3 million barrels, total crude supplies remained above the upper limit of the average range for this time of the year.

Inventories at Cushing, Oklahoma, the biggest US storage hub and delivery point for NYMEX-traded contracts, fell by 0.6 million barrels to 40.6 million from the preceding week and were well beneath last years 47.0 million during the comparable period.

US crude oil imports jumped by 870 000 barrels per day to 7.7 million bpd last week. Inbound shipments averaged over 7.5 million bpd over the past four weeks and were 9.4% below the same period a year earlier. US crude output fell by 17 000 barrels to 8.06 million bpd, retreating from a 25-year high.

Refinery utilization dropped to 91.5%, down from 92.6% from the previous week. Motor gasoline production jumped, while distillate fuel output decreased, averaging 9.3 million and 5.0 million barrels per day, respectively.

Total gasoline inventories rose by 1.3 million barrels in the seven days through December 13 to 220.5 million, outperforming projections for a 1.5 million build, but remained above the upper limit of the average range for this time of the year. Distillate fuel inventories, which include diesel and heating oil, fell by 2.1 million barrels to 116 million, defying projections to remain flat, and were below the lower limit of the average range.

Oil prices also drew some support after data by Japan’s Ministry of Finance showed the Asian nation’s crude imports rose by 10.5% to 3.7 million barrels in November from a year earlier, brightening demand prospects.

FOMC meeting

Meanwhile, investors remained wary and avoided entering big positions before the conclusion of FOMCs two-day meeting later today. Although a recent series of upbeat US data, including retail sales, industrial production, unemployment and third quarter growth, raised bets the Federal Reserve might trim its monthly bond purchases in December, the majority of economists haven’t shifted their expectations that the central bank will wait most likely until March.

Also supporting that view, the Department of Labor reported yesterday that consumer inflation in the US remained benign and well below Fed’s official target of 2%, leaving enough spare room for easy money supply. The consumer price index (CPI) rose 1.2% in November, compared to a year ago, short of analysts’ estimates of a 1.3% increase. In October, consumer prices jumped by 1.0%. Month-on-month, consumer inflation was flat, compared to October’s 0.1% decline and short of analysts’ projections of an increase by 0.1%.

Consumer prices excluding food and energy costs, or core consumer prices, increased 1.7% in November from a year ago, the same as in October and in line with expectations. Month-on-month, Core CPI rose by 0.2% in November from 0.1% in October. Analysts’ forecasts pointed to a 0.1% gain. The Federal Reserve regards that core prices can be a better gauge of longer-term inflationary pressure, because they exclude the volatile food and energy categories.

The Federal Reserve may begin to scale back its $85 billion in monthly asset purchases at the committee’s policy meeting on December 17th-18th rather than wait until January or March, according to 34% of economists who participated in a Bloomberg survey on December 6th. In November’s survey, 17% of respondents projected a tapering in December.