Oil Mixed As Fed Cut Delays Trump Expectations Of Tight Market Into Summer

Meanwhile, crude consumption growth in China is set at a measly 1 percent: File Image/Pixabay

Despite talk that crude market tightness could be a trend moving forward, traders on Wednesday succumbed to their bearish proclivities and caused oil to settle lower based on a hike in U.S. stockpiles and reassertions that the Federal Reserve will delay cutting interest rates.

The Energy Information Administration reported that U.S. crude inventories rose by 4.2 million barrels last week, but this was due to unplanned refinery outages following a winter storm as well as planned turnarounds.

By contrast, gasoline stocks drew down for a fourth straight week to a two month low of 244.2 million barrels, and this caused Andrew Lipow, president of Lipow Oil Associates, to say, "If this trend continues for the next six to eight weeks, we could see gasoline inventories tighten up as we go into the driving season."

Meanwhile, John Williams, president of the Federal Reserve Bank of New York, told media that while inflation has ebbed considerably, it's still unclear if the bank has done everything to get it back to a 2 percent target.

Williams added that inflation will likely decline between 2 percent to 2.25 percent this year and to 2 percent in 2025.

Brent on Wednesday settled up 3 cents at $83.68 per barrel and West Texas Intermediate settled down 33 cents at $78.54; both benchmarks are poised for a gain of 6.3 percent for the month.

Oil's range bound status wasn't helped by a report released Wednesday from China National Petroleum Corp. predicting that crude consumption growth is expected to expand by just 1 percent this year due partly to the rise in electric vehicles; this clashed with more optimistic news earlier in the week of a boom in travel in China during the Lunar New Year holidays, as well as local refiners procuring cargoes globally since the holiday.

In other oil related news on Wednesday, the U.S Department of Defense stated that it has struck 230 targets in Yemen since Washington ordered airstrikes last month, and U.S. Central Command reported shooting down five Houthi airborne droves in the Red Sea overnight.

For its part, the Houthis were credited for knocking out several underwater telecommunications cables linking Europe and Asia.

However, the effect of these tensions on the crude market was downplayed by Goldman Sachs, which viewed the geopolitical risk premium in oil prices as modest with crude production unaffected by the current conflicts.