New York - Crude oil futures climbed back up in choppy trading on Wednesday, getting a lift from US equities, which rallied on a bellwether stock's earnings jump.
The shift erased losses brought about by a larger-than-expected increase in US inventories and in reaction to a report that Iran may consider a halt to its nuclear programme.
Prices moved little after the US Federal Reserve, as expected, said at the end of a two-day policy meeting that it will keep interest rates exceptionally low at least through late 2014.
“Oil got support from equities, which are on a rally mode and as support developed after the day's lows around $103 was not violated,” said Hamza Khan, analyst at the Schork Group in Villanova, Pennsylvania.
The central bank said the US economy had been expanding moderately and that the labor market had improved in recent months. It noted, however, that while the jobless rate had declined, it remained elevated.
US crude inventories rose almost four million barrels in the week to April 20, up for the fifth week in a row, the US Energy Information Administration said. A forecast in a Reuters poll had called for a 2.7-million-barrel build.
The EIA also reported larger-than-expected drawdowns of 2.24 million barrels in US gasoline stockpiles, their 10th straight week of decline, and 3.05 million barrels in distillates, which include heating oil and diesel, their fourth drop in five weeks.
“The report is neutral to bullish,” said John Kilduff, partner at Again Capital LLC in New York.
“The commitment by the US refining industry to keep a lid on refined product inventory levels remains unbowed,” he said.
The data had little impact on product futures. However, front-month heating oil futures posted a premium against gasoline futures for the first time since February 29, according to Reuters data.
“The gasoline bubble has burst as there are more imports coming in from Europe,” said Phil Flynn, analyst at PFGBest Research in Chicago.
“People were expecting that Brent crude, which has been guiding US gasoline's moves, would remain high, but it has fallen sharply from the March highs,” Flynn said.
By 1.50pm, ICE Brent crude for June delivery traded in London at $118.92 a barrel, up 76 cents.
US June crude rose 82 cents to $104.37.
Prices initially fell back in early trade after a report from Bloomberg said Iran was considering a Russian proposal to halt its nuclear work to avert new European Union sanctions. The report was sourced to Tehran's envoy in Moscow. - Reuters