Fueling Strategy: Please partial fill tonight, Thursday prices will drop 5 cents! Be Safe
NMEX Crude $ 90.00 UP $1.6300
NYMEX ULSD $3.6774 UP $0.0563
NYMEX Gas $2.6972 UP $0.1027
NEWS
Oil futures climbed on Wednesday, with global and U.S. benchmark crude settling at their highest prices in more than three weeks, after U.S. government data showed weekly declines for both crude and gasoline inventories and as recent reports said Iran may be preparing an attack on Saudi Arabia.
Oil prices held onto their gains for the session following the Federal Reserve’s decision to lift its benchmark interest rate by 75 basis points, finding support from the potential for a slowdown in the rate hikes ahead, analysts said.
PRICE ACTION
- West Texas Intermediate crude for December delivery rose $1.63, or 1.8%, to settle at $90 a barrel on the New York Mercantile Exchange.
- January Brent crude the global benchmark was up $1.51, or 1.6%, at $96.16 a barrel on ICE Futures Europe. Both Brent and WTI oil settled at their highest since Oct. 10, according to Dow Jones Market Data.
- Back on Nymex, December gasoline rose 4% to $2.6972 a gallon, while December heating oil added nearly 1.6% to $3.6774 a gallon.
- December natural gas rose 9.7% to settle at $6.268 per million British thermal units. Prices have been volatile in recent sessions, losing 10.1% on Tuesday after a nearly 12% rise Monday.
SUPPLY DATA
A tick higher in refining activity, ongoing strength in exports, and a move lower in oil production “encouraged a 3 million-barrel draw to crude inventories,” said Matt Smith, lead oil analyst, Americas, at Kpler, in emailed commentary.
The Energy Information Administration on Wednesday reported that U.S. crude inventories fell by 3.1 million barrels for the week ended Oct. 28.
On average, analysts forecasted a decrease of 1.6 million barrels, according to a poll conducted by S&P Global Commodity Insights.
The EIA also showed a weekly inventory decline of 1.3 million barrels for gasoline, while distillate stockpiles edged up by 400,000 barrels. The analyst survey had called for decreases of 1.9 million barrels for gasoline and 1 million barrels for distillates.
Crude stocks at the Cushing, Okla., Nymex delivery hub climbed by 1.3 million barrels to 28.2 million barrels for the week, stocks in the SPR declined by 1.9 million barrels to 399.8 million barrels, and total domestic petroleum production fell by 100,000 barrels to 11.9 million barrels, EIA data showed.
Meanwhile, a “widening discount for WTI relative to Brent throughout trading in the second half of October points to continued strength in U.S. exports and, coupled with a seasonal recovery in domestic refinery runs, should mean continued U.S. crude [supply] draws in the coming weeks,” said Troy Vincent, senior market analyst at DTN.
However, “given that U.S. commercial crude stocks are far more robust than those of refined products, this outlook of falling U.S. crude stocks isn’t decidedly bullish for oil prices, as it will likely coincide with a recovery in East Coast refined product imports and product inventories where they’re needed most,” said Vincent.
OTHER MARKET DRIVERS
Oil prices held onto the bulk of their gains after the Federal Reserve’s decision to raise interest rates as expected, which was released about a half hour ahead of the futures price settlement.
In the press conference that followed, Fed Chair Jerome Powell acknowledged that at some point “it will be appropriate to slow the pace of increases.”
Stewart Glickman, energy equity analyst at CFRA Research, told MarketWatch that there was “a glimmer of hope that the incessant rate hikes could be moderating soon.” If that “puts some wind in the sails for the economy, it’s a plus for GDP, and therefore for oil demand. Positive for oil, all else being equal.”
“The risk, of course, is that inflation numbers subsequently refuse to cooperate, and then we have to go back to a more hawkish Fed,” said Glickman.
Powell also said at the press conference that interest rates are likely to end up “higher than previously expected.”
Halfway through the press conference, Powell’s statements indicated more of a hawkish stance on higher rates, said Tariq Zahir, managing member at Tyche Capital Advisors.
This put pressure on risk assets in all asset classes, he said, adding that Powell has said several times we have ways to go in raising rates.
“This should weigh on equity markets and energy markets, while creating a bid to yields in the bond markets,” said Zahir.
Oil has been pressured on worries the Fed’s aggressive rate increases will tip the global economy into a sharp slowdown, curtailing demand for crude. Prices rose Tuesday, however, amid reports that Iran was planning an attack on Saudi Arabia.
“A lot of the Iran/Saudi Arabia news was priced in yesterday, but the latest headlines did reiterate their legitimacy and remind traders of the bullish supply-side threat,” Tyler Richey, co-editor at Sevens Report Research, told MarketWatch.
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