29 January 2014, News Wires – Brent futures held steady above $107 a barrel on Wednesday ahead of the outcome of the US Federal Reserve’s two-day meeting due later in the day, with prices supported as concerns of turmoil in emerging economies eased.
Asian markets rallied and most other risk assets improved after Turkey stunned investors with a huge hike in interest rates, stirring hopes the drastic action would short-circuit a vicious cycle of selling in emerging markets and revive risk appetite.
Brent crude gained $0.02 to $107.43 a barrel early on Wednesday, after ending $0.72 higher. US oil fell $0.21 to $97.19, after settling at its highest since 31 December, Reuters reported.
“There is bit of a ‘risk-on’ mood at the moment across markets, as is evident in equities,” said Ric Spooner, the news wire quoted chief market analyst at CMC Markets in Sydney as saying.
“In oil, we probably saw some buying overnight as traders took positions ahead of the Fed meet and because we saw some sell-off earlier on.”
The European benchmark has declined 3% so far this month, snapping three straight months of increases. The US contract has lost 1.3% so far this month, but that’s on the back of a steep gain of 6% in December, the highest since July.
A cold spell, an improvement in risk appetite and expectations of a steady recovery in the US economy may keep Brent trading between a $107 and $109 a barrel range over the next week, Spooner said. The US benchmark may stay in a $97.50-$99 range, he said.
Investors are now awaiting inventory data from the US Energy Information Administration (EIA), due later in the day, to gauge the country’s demand outlook.
Crude inventories rose by 4.7 million barrels in the week to 24 January to 360.4 million, the American Petroleum Institute said, compared with analysts’ expectations for an increase of 2.3 million barrels. Crude stocks at the Cushing, Oklahoma, delivery hub rose by 221,000 barrels.
Distillate stockpiles, which include diesel and heating oil, fell by 1.8 million barrels, compared with expectations for a 2.2 million-barrel drop, the data showed.
Yet further gains for oil, particularly the US benchmark, may be limited as larger that usual refining capacity is taken down for maintenance this spring, reducing demand.
Refiners on the Gulf Coast, home to about half of the country’s capacity, are set to shut an average of 628,000 barrels per day of crude distillation capacity in the first quarter and another 243,000 bpd in the second, according to data made available to Reuters. That is more than 100,000 bpd above the five-year average.