Americas News
More Oil Gains As U.S. Export Volumes Suggest Demand Resiliency
A weak U.S. dollar combined with a small U.S. Federal Reserve rate hike gave investors added courage on Wednesday, enough to compel them to propel oil prices forward once again, this time by nearly 2 percent.
The Fed raised interest rates by 25 points and suggested it was considering pausing further borrowing cost increases due to the chaos in financial markets from the collapse of two U.S. banks.
Also, the dollar fell to its lowest level since Feb. 2 against a basket of other currencies, supporting oil demand.
Shrugging off the Energy Information Administration's (EIA) weekly data showing crude stockpiles rose 1.1 million barrels last week to a 22-month high, traders caused Brent to settle up $1.37, or 1.8 percent, at $76.69 per barrel.
West Texas Intermediate ended $1.23, or 1.8 percent, higher at $70.90.
One reason the stock builds were ignored was because they were smaller than the 3.3-million barrel increase reported on Tuesday by the American Petroleum Institute.
Bob Yawger, managing director, energy futures strategist at Mizuho, added, "We just have a lot of crude oil in storage and it's not going to go away anytime soon."
As for the Fed, Ritterbusch and Associates analysts told customers in a note that the hike and their "accompanying language prompted some increase in risk appetite that easily spilled into the oil space."
But perhaps most significantly, oil on Wednesday was supported by bullish export data: according to the EIA, exports of crude and refined products surged to a record 12 million barrels per day (bpd), indicating a healthy demand outlook.
Daniel Ghali, a commodity strategist at TD Securities, said, "The knee-jerk reaction in risk assets is to the upside as the market anticipates the end of the tightening cycle is near and cuts could be forthcoming."
For its part, DailyFX stated that "A notable reduction in market jitters over the banking sector has seen a return of money to growth-linked assets such as oil….it's reasonable to expect that flow to continue, albeit in a nervy market prone to sudden reverses."
