By Barani Krishnan
Investing.com – The EIA delivered a larger weekly crude drawdown number than thought today. But oil traders quickly discounted that, turning their attention to the Federal Reserve’s July meeting minutes that showed no plans for a series of rate cuts, disappointing longs in the market.
New York-traded West Texas Intermediate crude settled down 45 cents, or 0.8%, at $55.68 per barrel.
London-traded Brent crude, the benchmark for oil outside of the U.S., gained 27 cents, or 0.4%, staying above the key $60 per barrel mark at $60.30 per barrel.
The Fed said in its July meeting minutes that it was important for the central bank to assess incoming economic data to determine the future path of monetary policy.
It also said most participants at its July meeting viewed the quarter-point policy easing they agreed to as “part of a recalibration of the stance of policy, or mid-cycle adjustment”, without seeing the need for an aggressive follow-through plan of rate cuts.
The Energy Information Administration reported earlier in the day that U.S. crude inventories decreased by 2.7 million barrels during the week ended Aug 16, more than the drop of 1.89 million forecast by analysts. A good chunk of the drop came from Cushing, the storage hub for U.S. crude in Oklahoma, which by itself saw a 2.5-million-barrel deficit.
The EIA also reported that gasoline inventories rose by 300,000 barrels and thatdistillate stockpiles surged by 2.6 million barrels.
The Fed’s Aug 22-24 Jackson Hole symposium in Wyoming is another event that’s likely to disappoint those hoping for a big rate cut, especially if Fed Chairman Jay Powell’s speech on Friday makes no inferences of the central bank turning more dovish.
“The main factor that will dictate the next move in the energy sector is the Fed,” said Tariq Zahir, managing member at the oil-focused New York fund Tyche Capital Advisors.
“All eyes will be on Jackson Hole on Friday where we will get some comments out of Powell regarding the Fed’s outlook on the economy. We could expect volatility return to the markets in the weeks to come, especially if the bond markets flatten out further from here or go inverted.”
In such a scenario, Zahir added, the reading on the global economy would translate to a slowdown.
“This would impact demand forecasts for crude oil, especially going into the weaker demand period of the upcoming fourth quarter and first quarter of next year," he said.