19 December 2013, News Wires – Brent crude oil futures held steady at over $109 a barrel on Thursday as the market shrugged off a decision by the US Federal Reserve to reduce its monetary stimulus programme, and remained focused on US crude stock draws.
Brent crude for February was down nine cents to $109.54 a barrel by 1145 GMT, after ending $1.19 higher on Wednesday.
US oil futures for February rose two cents to $98.08, while the January contract, which expires today, fell six cents to $97.74 after finishing 58 cents up.
Oil prices faced some headwinds early in the session after the dollar rallied hard on the Federal Reserve’s decision to reduce its bond buying, but this was the full extent of the impact.
“The ‘tapering proclamation’ yesterday gained a lot of attention – but it also turned out to be a non-event – oil price-wise,” said Michael Poulsen, oil risk manager at Global Risk Management.
The dollar index was up 0.51% against a basket of currencies at 1129 GMT. A stronger dollar is negative for oil as it makes the commodity more expensive for holders of other currencies.
Aside from this, analysts said the oil market was unaffected. “We’re not seeing much of a reaction,” said Ole Hansen, senior commodity strategist at Saxo Bank.
“Those who want to sell on the back of less liquidity will be met by those who want to buy as this is an indication that the Fed now believes the growth outlook is improving and that is what really drives these cyclical commodities.”
Traders have had plenty of time to prepare for the Fed’s move as the economic data coming out of the US has been generally positive over the last few months. The decision was also tempered by the Fed’s suggestion that its key interest rate would stay near zero even longer than previously promised.
The Fed’s move came in the wake of Wednesday’s US oil inventories report showing stock draws for a third week in a row, and a big, unexpected fall in distillates stocks. This leant support to crude prices.
Analysts at BNP Paribas said that the 2.9 million barrel draw in US crude stocks had been driven by higher refinery demand, as plants are ramping up following the completion of seasonal maintenance.
Over the last three weeks, stocks have fallen by 18 million barrels. “Refinery operators are taking advantage of superior refining margins that are being driven by relatively cheap cost of inputs,” the analysts said in a note.
Brent also remains elevated at just under $110 because of continued Libyan outages. Exports have fallen to 110,000 barrels per day (bpd) from more than 1 million bpd in July.
In South Sudan, about 200 oil workers have sought refuge at a United Nations base and are expected to be evacuated after five days of conflict.
With the Fed’s announcement out of the way, and traders closing their books ahead of the Christmas holidays, oil prices are expected to remain range-bound for the rest of the year, barring surprises.
“It will take quite a bit of news to push these markets now – this was really the last event this year,” said Hansen, who expects to see US crude trading at around $95.50-$99 a barrel, and Brent around $106-$111 a barrel until year-end.