Oil Slips After U.S. Stockpiles Data; Joins Other Markets in Awaiting Fed
By Barani Krishnan The EIA delivered the data oil bulls wanted. Will the Fed help them out too?Crude prices rose briefly on Wednesday after the Energy Information Administration reported the first weekly U.S. crude stockpile draw in three.But by noon in New York, the oil market was trading between flat and lower as traders awaited the Federal Reserve’s monthly policy statement at 2:00 PM ET, and Fed Chairman James Powell’s press conference at 2:30 PM ET, to see how accommodative their language would be for a rate cut in the near future.While most Fed watchers expect no immediate change in rates, they anticipate a dovish outlook from both the central bank and its chief that could hammer the dollar and boost the price of alternative investments such as gold, oil and other commodities.New York-traded West Texas Intermediate crude was down 18 cents, or 0.33%, at $53.93 a barrel by 12:59 PM ET (16:59 GMT). The U.S. crude benchmark rallied almost 4% on Tuesday after President Donald Trump tweeted that he would be meeting his Chinese counterpart Xi Jinping next week at the G20, raising hopes for a resolution toward the U.S.-China trade war. WTI was initially down on Wednesday and rebounded on the EIA report before sliding again.London-traded Brent crude, the benchmark for oil outside of the U.S., was down by eight cents, or 0.13%, at $62.06 per barrel.Crude oil inventories decreased by 3.11 million barrels in the week to June 14, according to the EIA. That easily beat the 1.08 million-barrel draw analysts had expected for last week, though it was nowhere close to offsetting the combined build of nearly 9 million barrels in two previous weeks.Gasoline inventories unexpectedly decreased by 1.69 million barrels, compared to expectations for a gain of 0.94 million barrels. Stockpiles of distillates, which include heating oil, diesel and other premium transport fuels su ch as jet and rail fuel, dropped by 0.55 million barrels, compared to forecasts for a build of 0.71 million.Prior to its latest dataset, the EIA reported a net growth of some 33 million barrels in crude over the past 12 weeks that crossed into the current peak driving season in the United States, when demand for gasoline should be at the year’s highs. Combined with recession fears generated by the U.S.-China trade war, oil prices lost about 20%from April’s highs, falling into a bear market.As of Wednesday, WTI was up 19% on the year while Brent showed an annual gain of 16%. Both were about 40% higher on the year in April when WTI hit 2019 highs of $66.60 and Brent $75.60.With the traders’ focus returning to the economy, analysts said the Fed’s policy statement and Powell’s press conference would be all-important for the direction in oil.Traders thought a rate cut was a given this time around, but the given economic horizon versus last week has changed with (U.S.-China) trade talks set to begin next week, and the Fed may be tempted to hold off cuts until the next meeting,” said Danny Flynn, commodities analyst at the Price Futures Group brokerage in Chicago.Aside from the watch on interest rate and weekly stockpile numbers, oil may get a boost in coming days as OPEC starts talking up production cuts again after managing to reset dates for its mid-year meeting. Members of the cartel agreed to push their official meeting to July 1, and conference with non-OPEC allies to July 2, switching from previously scheduled dates of June 25-26 that sparked intense bickering within the group.Saudi-led OPEC and its so-called OPEC+ alliance of producers led by Russia seek to extend production cuts of 1.2 million barrels per day until of the year.But with Iran seeking to challenge the Saudi-Russian domination of the cartel it helped to found, the path forward for oil bulls may not be as smooth.