Oil Prices Gyrate After Fed Rate Cut
NEW YORK (AP) — Oil futures fluctuated Wednesday after the Federal Reserve cut a key interest rate less than many investors had hoped, and the government reported larger than expected increases in crude oil and gasoline inventories last week.
Many investors had anticipated the half percentage point rate cut and were hoping for more, analysts said.
“A (half point) cut has been discounted by the (market),” said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Ill.
Falling interest rates tend to push the dollar lower. Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the greenback is falling.
In its weekly inventory snapshot, meanwhile, the Energy Department’s Energy Information Administration said crude and gasoline supplies rose by 3.6 million barrels each during the week ended Jan. 25. Analysts had expected crude supplies to rise by 2.3 million barrels, and gasoline inventories to rise by 1.9 million barrels.
“This gives an overall bearish cast to the report,” said Tim Evans, an analyst at Citigroup Inc., in a research note.
Light, sweet crude for March delivery fell 7 cents to $91.57 a barrel on the New York Mercantile Exchange but alternated between gains and losses. February gasoline futures fell 1.44 cents to $2.3151 a gallon.
Supporting prices was word that production of 315,000 barrels of crude a day at a Canadian oil sands field has been temporarily stopped due to freezing temperatures. Dow Jones Newswires reported that operations at the Syncrude Canada field will not resume for several days. Canada is the single largest supplier of crude oil to the U.S.
Other energy futures were mixed Wednesday. February heating oil futures fell 0.18 cent to $2.54 a gallon. The EIA said inventories of distillates, which includes heating oil and diesel fuel, fell by 1.5 million barrels last week, slightly less than analysts had expected.
March natural gas futures rose 8.4 cents to $8.027 per 1,000 cubic feet.
In London, Brent crude futures fell 17 cents to $91.83 a barrel on the ICE Futures exchange.
Refinery activity fell by 1.5 percentage point last week to 85 percent of capacity, much more than the 0.2 percentage point decline analysts predicted.
Demand for gasoline fell by about 24,000 barrels last week, the EIA said, but rose over the last four weeks by 1.4 percent compared to the same period last year. Analysts tend to give the weekly demand numbers greater weight, but note that both are often revised downward when the EIA issues its monthly petroleum reports.
Recent revised EIA reports suggest demand fell more than expected late last year, Ritterbusch said.
“Bottom line, we are seeing demand deterioration due to high prices,” Ritterbusch said.
At the pump, gas prices rose 0.5 cent overnight to a national average of $2.983 a gallon, reversing a recent trend of falling prices, according to AAA and the Oil Price Information Service. Retail gas prices tend to lag the futures market. While they have mostly fallen since oil futures began their retreat from records over $100 a barrel earlier this month, they are now rising as oil has rebounded on hopes that the Fed’s rate cuts and Congressional stimulus efforts will stave off a serious economic slowdown.
The EIA and many analysts expect gas prices to rise in the spring to new records near $3.50 a gallon. Gas prices peaked at a record $3.227 a gallon last May. At the moment, prices are 83 cents higher than they were one year ago.
If you enjoyed this post, please consider to leave a comment or subscribe to the feed and get future articles delivered to your feed reader.
Comments
No comments yet.
Leave a comment