Singapore: Oil rose towards $74, rebounding from six-week lows, after US President Barack Obama’s State of the Union address and the Fed’s decision to maintain low interest rates revived some confidence about economic growth.
Obama promised Americans that he would revive jobs growth and curb exploding deficits in a speech to Congress that also took a more moderate tone on U.S. banking curbs, and he pledged to double exports within the next five years.
“Once President Obama comes out with more details about his plans for reform of the US banking sector, stock markets could turn around and that would be bullish for oil,” said Ben Westmore, a commodities analyst at the National Australia Bank.
US crude for March delivery rose 30 cents to $73.97 by 9:23am. On Wednesday it touched $72.65, the lowest intraday price since 14 December. Prices have dropped 12% from a 15-month peak near $84 on 11 January.
London ICE Brent crude for March settlement gained 23 cents to $72.47 a barrel.
Earlier on Wednesday, the Fed said it intended to end some emergency lending and asset-buying programmes and sounded slightly more upbeat on the US economy.
A prior government report showed a larger-than-expected gain in US gasoline stockpiles and a surprise increase in distillates, a category that includes heating oil and diesel. The gains came even as refiners kept processing rates at historically low levels.
The Energy Information Administration (EIA) said US oil demand shrank by 2% in the four weeks to 22 January from a year earlier, when the US economy was hitting the bottom of its cycle, according to Harry Tchilinguirian, head of commodities research at BNP Paribas in London.
“For now, freight indicators are not showing any tangible improvement that would suggest merchandise is once again moving and re-stocking by businesses is taking place,” Tchilinguirian wrote.
Distillate use fell more than 8 percent over the past four weeks, the EIA report showed.
“If you look at January last year, to fall from that level is quite concerning,” Westmore said. “There is really no indication that refiners are expecting demand to pick up any time soon.”
The market shrugged off an unexpected 3.9-million barrel drop in U.S. crude inventories as imports plunged to below 8 million bpd.
“The fall in the crude stockpiles was partially associated with a decline of imports rather than with increased demand,” Westmore added.
Crude stockpiles at Cushing, Oklahoma, the pricing point for US benchmark WTI crude, contracted by 700,000 barrels, the IEA said.
Refinery utilisation in the United States, or the proportion of capacity at which plants operate, was little changed at 78.5 percent, close to the lowest in 25 years for a period outside the hurricane season.
Still, gasoline stocks climbed 2 million barrels, compared with forecasts for a 1.1-million-barrel gain, while distillates unexpectedly rose 400,000 barrels.
The Sabine-Neches waterway that serves several oil refineries near Port Arthur, Texas, has been partially reopened to tanker traffic after a leaking tanker ship was removed from the channel, the U.S. Coast Guard said on Wednesday.