Oil Pushes Higher as Fed’s Plan and US Stockpile Draw Buoy Mood

By Bloomberg

Mar 21, 2024

image is BloomburgMedia_SAO57PDWX2PS00_21-03-2024_05-00-13_638465760000000000.jpg

Storage tanks at the Torrance Refining Co. in Torrance, California, U.S., on Monday, Feb. 28, 2022. The U.S. and its allies are discussing a coordinated release of about 60 million barrels of oil from their emergency stockpiles after Russia’s invasion of Ukraine pushed crude prices above $100. Photographer: Bing Guan/Bloomberg

(Bloomberg) -- Oil gained after the Federal Reserve signaled it still planned to cut interest rates this year, boosting risk appetite and hurting the dollar.

Global benchmark Brent rose toward $87 a barrel following the biggest drop in about a month on Wednesday after it strayed into overbought territory. West Texas Intermediate was near $82. Fed officials maintained their outlook for three rate cuts this year after keeping policy steady on Wednesday. A weaker US currency tends to benefit commodities priced in the greenback.

Nationwide US crude inventories, meanwhile, dropped by 1.95 million barrels, shrinking for a second week to remain below the five-year seasonal average. A bigger-than-expected draw was also seen in gasoline holdings.

“While there are signs that the oil rally has run out of steam, oil and broader markets have taken some comfort in the Fed reiterating its forecast for three rate cuts this year,” said Warren Patterson, head of commodities strategy at ING Groep NV. Still, expectations for persistent inflation should act as a headwind for oil over the longer term, he said.

Crude has posted a double-digit percentage advance this year, breaking out of a narrow range in recent weeks, as OPEC+ extended production cuts. Geopolitical tensions including Ukrainian drone attacks on Russian refineries and rising transport costs due to strikes on ships in the Red Sea have also supported prices. However, gains have been limited by surging supply from outside the cartel.

By Yongchang Chin