Oil Price - April 27

[dan_s]

Oil jumped almost 3% on Wednesday April 27 to close above $45.33 a barrel for the first time since November 4, 2015, reaching new highs for 2016 amid mixed signs from the U.S. oil market and U.S. Federal Reserve. The oil market was the tale of two halves today with the inventory report coming in the morning and the Federal Reserve announcing interest rate intentions in the afternoon.

WTI oil opened at $44.64/barrel this morning, and rose slightly early on speculation that the inventory draw may continue.

When the actual numbers were announced at 10:30am EDT, crude oil had experienced a storage build of 2.0 million barrels for the last week, above the average estimate of a 1.4 million barrel build. By 11:00 EDT, oil had fallen to an intraday low of $43.77/barrel. The fall was a direct result of the inventory build.

Looking deeper into the report unveiled that crude production in the U.S. had fallen to 8.94 million barrels a day, the lowest reading since October 2014, according to EIA data. Consequently, oil price began a slow climb as the wait was on for the Fed afternoon meeting. [The rate of decline in Non-OPEC production will accelerate this summer. - Dan]

Oil has rebounded in the last few months from the lowest levels the market has seen since 2003, due to the slumping U.S, production that will reduce global surplus and bring the market closer to equilibrium. Many analysts are projecting output cuts to increase in the latter half of 2016, with the potential of a full rebalance coming to the market by late 2016 or early 2017.

Fed: no changes in rates

The Fed announced today that they would leave the benchmark interest rate unchanged for the time being. In the early afternoon the Fed made the announcement, changing their language from forecasting that “global economic and financial developments continue to pose risks,” to saying that the Fed will “closely monitor” such developments. The reduced global risk was viewed by many analysts as a positive indication for the economy.

The announcement by the Fed sent WTI and Brent oil climbing prior to close with an intraday high of $45.62/barrel. The dollar was sent tumbling to session lows following the Fed announcement, spurring commodities denominated in American Dollars.