Crude oil little-changed despite build in supplies

Crude oil prices hovered close to a four-week high, despite data from the US Energy Department showing a big increase in oil stockpiles last week.

There’s quite a few things hovering around today that are potential headwinds for the price of oil. First, the Energy Information Administration, the statistical arm of the US Energy Department, reported that inventories of crude oil rose by 6.4 million barrels last week, far larger than had been anticipated by analysts.

Second, the Fed announced another reduction in stimulus. The central bank’s bond purchases will be cut by a further $10 billion to a monthly total of $65 billion. A smaller amount of stimulus being pumped into the market has the potential to hurt demand.

Thirdly, there is very much a risk-off attitude pervading the financial markets today, stemming from the precipitous falls of emerging-markets currencies.

The price of oil has shown fortitude in the face of these vagaries, though. Although such a large build in crude inventories would normally be considered to undermine fundamentals for the commodity, this was offset to a large degree by what has been going on with distillate fuels.

Demand for distillates surged 20% last week, climbing to its highest level in close to six years amidst severely cold weather, driving down stockpiles by 4.58 million barrels to 116.2 million, the third successive weekly decline. This helped support oil and by mid-afternoon in New York, just prior to the FOMC decision, crude oil futures for March were trading down 0.18% at 97.25. 15 minutes after the FOM announcement the price was little changed. 

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