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The Federal Reserve today concluded a two-day meeting and released a statement at 7pm BST saying that the FOMC had ‘decided to await more evidence that progress will be sustained before adjusting the pace of its purchases’. The Fed’s will therefore continue to purchase $85 billion of securities each month.
This bodes well for demand and has proved very supportive for the oil price in today’s trading. Shortly after the Fed announcement, crude futures for November were trading up 1.4% at $106.80 a barrel.
Data from the Energy Information Administration earlier had shown that US crude supplies declined substantially last week, falling by 4.4m barrels. US stockpiles are now at their lowest level since March 2012. Inventories at Cushing, Oklahoma, the price settlement point for crude futures, declined for the eleventh week in a row.
US output continues to grow though: at 7.8 million barrels per day it managed to outstrip US imports (which were 7.6m per day) last week, the first time this has happened since the EIA has been issuing its weekly petroleum status report.
Refineries continue to operate at high rates, which has contributed to the draw in crude inventories, with capacity utilisation running at 92.5% last week. Based on the continuing draws in crude and the high refinery rates, activity in the energy sector looks to be warming up and, along with the Fed’s decision to maintain stimulus, this could give oil some momentum.