Crude Oil Ends Higher On Supply Data, Fed Decision

(RTTNews) - U.S. crude oil moved up to end at a one-week high Wednesday, after the Federal Reserve decided to maintain its low interest rates, while affecting a $10 billion cut to its monthly bond-buying program. Investors also weighed a report from the Energy Information Administration that showed U.S. crude oil stockpiles to have dropped last week, albeit less than expected.

Data from the Energy Information Administration revealed that U.S. crude oil inventories dipped 2.90 million barrels, while gasoline stocks added 1.30 million barrels in the week ended December 13. Analysts expected crude oil inventories to drop by 3 million barrels and gasoline stocks to gain 1.5 million barrels last week.

The Federal Reserve on Wednesday tapered its massive bond-buying program by $10 billion to $75 billion per month, citing recent improvement in the U.S. jobs market. Beginning in January, the Fed will buy mortgage-backed securities at a pace of $35 billion per month rather than $40 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $40 billion per month rather than $45 billion per month.

Policy makers expect to see sustained jobs creation and an uptick in the rate of inflation before further scaling back their unprecedented support measures. It was stated any additional reduction in the size of QE3 will be contingent on economic data.

Light Sweet Crude Oil futures for January delivery, the most actively traded contract, gained $0.58 or 0.6 percent to close at $97.80 a barrel on the New York Mercantile Exchange Wednesday.

Crude prices for January delivery scaled a high of $98.01 a barrel intraday and a low of $97.02.

Yesterday, oil settled almost flat as investors await the outcome of the U.S. Federal Reserve policy review meet that began earlier today, anticipating the a cut to the Fed's $85 billion monthly bond-buying program. With the Fed likely to begin tapering its quantitative easing program, speculations now center around the timing and quantum of cut.

Tuesday after the market hours, the API said US crude oil inventories declined 2.5 million barrels and gasoline stocks shed 481,000 barrels in the weekended December 13.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 79.98 on Wednesday, down from 80.04 late Tuesday in North American trade. The dollar scaled a high of 80.20 intraday and a low of 80.01.

The euro traded higher against the dollar at $1.3793 on Wednesday, as compared to its previous close of $1.3768 late Tuesday in North America. The euro scaled a high of $1.3808 intraday and a low of $1.3706.

In economic news from the U.S., the Commerce Department said housing starts surged up 22.7 percent to a seasonally adjusted annual rate of 1.091 million in November from a rate of 889,000 in October. Economists had expected housing starts to come in at an annual rate of 955,000.

From the euro zone, German business sentiment improved in December in line with economists' expectations survey results published by the Ifo Institute revealed. The headline business climate index rose to 109.5 in December from 109.3 in November. The reading matched economists' forecasts.

Meanwhile, the U.K. claimant count fell slightly to 3.8 percent in November from 3.9 percent in October, the Office for National Statistics said. The rate matched economists' expectations. The number of people claiming Jobseeker's Allowance fell by 36,700 to 1.27 million, the lowest figure since January 2009. Economists were expecting a fall of 35,000.

Elsewhere, policymakers of the Bank of England unanimously decided to maintain the interest rate at 0.50 percent and quantitative easing at GBP 375 billion, the minutes of the meeting held on December 4 and 5 showed.