Crude Oil Trades Above $83 After Fed Pledges to Keep Rates Low

By Ben Sharples and Christian Schmollinger

April 29 (Bloomberg) -- Crude oil traded above $83 a barrel after the Federal Reserve pledged to keep U.S. interest rates low and a government report showed refineries operating at the highest level in almost two years.
Oil gained 1 percent yesterday as the Federal Open Market Committee said economic conditions “are likely to warrant exceptionally low levels of the federal funds rate for an extended period.” Gasoline supplies fell 1.24 million barrels last week, a report from the Energy Information Administration showed. They were forecast to increase, according to a Bloomberg News survey.
“The Fed seemed to re-emphasize the strength in the U.S. economy, the commentary really focusing more on the positives of the recovery, and that’s probably had an impact,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne. “The EIA data was positive in the sense that gasoline stocks fell unexpectedly.”
Crude oil for June delivery was at $83.08 a barrel, down 14 cents, in electronic trading on the New York Mercantile Exchange at 2:37 p.m. Singapore time. Yesterday, the contract rose 78 cents to settle at $83.22.
The Federal Reserve’s pledge and better-than-estimated earnings sent U.S. equities higher. The Standard & Poor’s 500 Index gained 0.7 percent to 1,191.36.
Refineries operated at 89 percent of capacity, up 3 percentage points from the prior week, and the highest level since July 2008, the Energy Department report showed.
Crude Supplies
U.S. inventories of crude oil rose 1.96 million barrels to 357.8 million last week, the highest level since June, the report showed. Stockpiles were forecast to climb 1 million barrels, according to a Bloomberg News survey. Imports increased 0.7 percent to 9.68 million barrels a day, the highest since September.
Stockpiles of distillate fuel, a category that includes heating oil and diesel, climbed 2.94 million barrels to 151.8 million last week. A 1.5 million-barrel gain was estimated in the survey.
“The builds in crude and distillates mean that the fundamental situation is getting worse in the U.S.,” National Australia Bank’s Westmore said. “Overall, I don’t think this is a positive weekly read for the fundamentals.”
Saudi Arabian Oil Minister Ali al-Naimi said crude oil prices are at “sustainable levels” as the global economy recovers from the worst slump since the 1930s. He said the world economy is entering into a “new growth trajectory.”
Dollar Decline
The dollar declined yesterday after the Fed announcement, bolstering the appeal of commodities. The U.S. currency traded down 0.1 percent at $1.3207 per euro at 2:38 p.m. Singapore time, after falling 0.4 percent yesterday.
Brent crude oil for June settlement traded at $86 a barrel, down 16 cents, on the London-based ICE Futures Europe exchange at 2:37 p.m. Singapore time. Yesterday, the contract rose 38 cents, or 0.4 percent, to $86.16.
Stockpiles at Cushing, Oklahoma, the delivery point for New York traded futures, climbed 1.3 percent to 34.6 million barrels, the highest since the week ended Jan. 1. This build has continued to put pressure on the West Texas price versus Brent futures, said analysts from Societe Generale in a research note yesterday.
Brent is now trading at a premium of $2.92 a barrel to New York futures and reached $3.34 on April 27, the highest since Aug. 17.

Source: http://www.bloomberg.com/apps/news?sid=aDBstpSwnRnE&pid=20601087