(For Bloomberg fair value curves, see CFVL <GO>)
Sept. 19 (Bloomberg) -- West Texas Intermediate climbed to the highest level in a week after the Federal Reserve said it will maintain monthly bond purchases to stimulate economic growth in the U.S., the world’s biggest oil consumer.
Futures advanced as much as 0.9 percent after rising the most in more than three weeks yesterday. The Federal Open Market Committee said it will continue buying $85 billion in securities each month. U.S. crude stockpiles fell to the lowest level since March 2012, and inventories at Cushing, Oklahoma, the delivery point for WTI contracts, dropped for an 11th week, according to a government report yesterday.
“Completely reversing the tapering policy was a major surprise,” said Guy Wolf, global head of market analytics at Marex Spectron Group in London. “In the short-term this is more positive than negative as tapering was a de facto monetary tightening. Longer term, the picture is less positive.”
WTI for October delivery, which expires tomorrow, gained as much as 92 cents to $108.99 a barrel in electronic trading on the New York Mercantile Exchange, the highest since Sept. 12, and was at $108.74 as of 12:27 p.m. London time. It surged 2.5 percent yesterday, the biggest increase since Aug. 27. The volume of all futures traded was about 18 percent less than the 100-day average. The more active November contract was up 61 cents at $107.89.
Brent for November settlement rose as much as 66 cents, or 0.6 percent, to $111.26 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude was at a premium of $2.98 to WTI for the same month. The spread shrank for a third day yesterday to $3.32, the narrowest since Aug. 19.
Fed Chairman Ben S. Bernanke and his colleagues refrained from paring stimulus as rising borrowing costs show signs of slowing the four-year expansion. Treasury yields have jumped since May, when Bernanke first outlined a possible timetable for a reduction in the asset purchases that have swelled the Fed’s balance sheet to $3.66 trillion.
There’s “no fixed calendar schedule” for tapering, he said yesterday in Washington after the two-day FOMC meeting, signaling the central bank may act later this year.
“News of the Fed refraining from tapering comes at the same time as relatively low spare capacity and relatively low crude and product stocks,” Miswin Mahesh, a commodities analyst at Barclays Plc in London, said in an e-mailed report today. “U.S. oil-demand growth has exceeded consensus expectations this year.”
U.S. crude inventories slid by 4.37 million barrels to 355.6 million in the week ended Sept. 13, the Energy Information Administration reported yesterday. Supplies were projected to decrease by 1.2 million, according to the median estimate of 11 analysts surveyed by Bloomberg News.
Stockpiles at Cushing, the largest U.S. oil-storage hub, declined by 861,000 barrels to 33.3 million, said the EIA, the Energy Department’s statistical arm. That’s the lowest level since February 2012.
Distillate supplies, a category that includes heating oil and diesel, dropped by 1.08 million, compared with a predicted 500,000 barrel gain. Gasoline inventories fell by 1.63 million barrels last week, the data show. They were forecast to climb by 500,000 barrels, according to the survey.
Refineries operated at 92.5 percent of capacity, unchanged from the prior week. Plants are often idled in September and October for maintenance.
--Editors: Raj Rajendran, Matthew Brown