Crude Oil Rallies After Fed Decision, But Still Ends Lower

(RTTNews) - U.S. crude oil rallied late in the session but still ended lower on Wednesday, after a weekly official oil report from the U.S. Energy Information Administration showed crude stockpiles in the U.S. to have increased much more than expected. Nevertheless, crude oil prices pulled back sharply after the Federal Reserve policy decision was announced, even as the dollar trended higher.

Earlier today, a report from the U.S. Energy Information Administration showed U.S. crude oil inventories to have risen 3.7 million barrels in the week ended September 12, while analysts anticipated a decline of 0.4 million barrels. The EIA report showed U.S. crude oil inventories at 362.3 million barrels, end last week.

Gasoline stocks dropped by 1.6 million barrels last week, with analysts anticipating a decline of 0.3 million barrels. Inventories of distillate, including heating fuel, rose 0.3 million barrels last week, with analysts expects stocks to remain unchanged.

Late Tuesday, data released by the American Petroleum Institute showed crude inventories were up by a larger than expected 3.3 million barrels in the week ended September 12.

Meanwhile, the Federal Reserve on Wednesday maintained its pledge to keep near-zero rates in place for a "considerable time" after its bond-buying stimulus program ends. The central bank reduced its monthly asset purchases to $15 billion, while indicating the program will likely end in October.

Nonetheless, policy makers refrained from offering a more specific time-line for raising interest rates. The Fed struck a cautious tone in its current assessment of the jobs situation, noting there remains significant slack in the labor market. Job growth slowed last month even as unemployment rate dipped back down to 6.1 percent.

Light Sweet Crude Oil futures for October delivery, the most actively traded contract, shed $0.46 or 0.5 percent to close at $94.42 a barrel on the New York Mercantile Exchange Wednesday.

Crude prices for October delivery scaled a high of $95.06 a barrel intraday and a low of $93.74.

On Tuesday, crude oil futures ended sharply higher after OPEC Secretary General Abdalla el-Badri said that the cartel may slash its output targets and also indicated a rebound in crude prices by the year end.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 84.19 on Wednesday, up from its previous close of 84.11 late Tuesday in North American trade. The dollar scaled a high of 84.43 intraday and a low of 83.94.

The euro trended lower against the dollar at $1.2951 on Wednesday, as compared to its previous close of $1.2960 late Tuesday in North American trade. The euro scaled a high of $1.2981 intraday and a low of $1.2898.

In economic news from the U.S., consumer prices unexpectedly declined in August, for the first time since May 2013, data released by the Labor Department showed.

The consumer price index dropped by a seasonally adjusted 0.2 percent in August after inching up by 0.1 percent in July. Excluding food and energy prices, the core consumer price index was unchanged in August after ticking up by 0.1 percent in each of the two previous months. Economists had expected core prices to edge up by 0.2 percent.

A National Association of Home Builders report on Wednesday showed U.S. homebuilder confidence in September jumped to its highest level in almost nine years, with a firming job market helping to unleash pent-up demand for new homes.

The report said the NAHB/Wells Fargo Housing Market Index jumped to a reading of 59 in September from 55 in August, while economists had expected the index to inch up to 56. The jump lifted the index to its highest level since hitting 61 in November of 2005.

Meanwhile, a report from the Commerce Department showed U.S. current account deficit to have shrunk 3.8 percent to $98.5 billion in the second quarter, from a revised $102.2 billion in the previous quarter. Economists expected a current account deficit of $114 billion for the quarter.

Elsewhere, China is pumping in about $81 billion or CNY 500 billion as stimulus into five of its largest lenders to boost liquidity amid slowing growth for a period of three months, media reports said Wednesday.

The People's Bank of China will provide CNY 100 billion each to the five state-owned banks through its standard lending facility. Analysts reportedly equated the latest move to a half-percentage point cut in the reserve ratio. The five largest banks include Industrial & Commercial Bank of China, Agricultural Bank of China, China Construction Bank, Bank of China and Bank of Communications Co.