Oil jumps to 2016 highs as USD drops
Oil prices jumped about 3 percent on Wednesday, hitting new
highs for 2016 as the dollar weakened after the Federal Reserve
announced it would leave US interest rates unchanged, Reuters
reported.
Oil had risen early, the day after an industry group said US crude
inventories had dropped in the latest week. But prices retreated
after the US Energy Information Administration reported in the
morning that crude stocks climbed 2 million barrels last week to an
all-time peak of 540.6 million barrels.
A Reuters poll of analysts had forecast a build of 2.4-million
barrels.
In early afternoon, the Fed announced it was leaving interest rates
unchanged, and issued a statement implying it was in no hurry to
raise rates. Futures of Brent and US crude's West Texas
Intermediate (WTI) surged minutes before settlement, hitting new
peaks for the year as the dollar sank to session lows.
"Bullish momentum from a technical perspective, in cahoots with
dovish Fed rhetoric, has this market on fire again despite the
crude inventories we're seeing," said Matt Smith, director of
commodities research at New York-headquartered Clipperdata.
Front-month Brent finished up $1.44, at $47.18, having hit a 2016
high of $47.45 earlier.
WTI's front-month contract settled up $1.29, percent, at $45.33 a
barrel, after hitting a 2016 high at $45.62.
Declines in the dollar make oil and other commodities denominated
in the greenback more affordable to holders of other
currencies.
Futures of heating oil, also known as ultralow sulfur diesel,
jumped 3 percent as stockpiles of distillates, which include ULSD,
fell much more sharply than expected, the EIA data showed.
Gasoline futures rose to August highs despite an inventory build
that also far exceeded expectations.
Some traders said crude's rally was overdone, and warned that
higher prices could encourage more production which would aggravate
a global supply glut.
Brent has gained more than $20 a barrel, or nearly 75 percent,
since hitting 12-year lows in late January. For April, it is up 19
percent, heading for its largest monthly gain in a year.
"With crude inventories building and the Saudis still pumping at
record levels, we feel the recent run-up has been mainly fueled by
the weakness on the dollar," said Tariq Zahir, trader and portfolio
manager at Tyche Capital Advisors in New York.
The prospect of a production freeze among the world's largest oil
exporters evaporated almost two weeks ago after a meeting between
OPEC and Russia ended in stalemate.
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