The price of US light crude oil spent a considerable stretch of today in the red, dropping to a five-month low after the release of government inventory data, but staged a remarkable recovery, as Janet Yellen, the nominee for Fed chairperson, endorsed monetary stimulus in front of the Senate’s Banking Committee.
Late in the open outcry trading session in New York, crude oil futures for December were unchanged for the day at $93.88 per barrel, having earlier touched $92.51.
The Energy Information Administration issued its weekly petroleum status report today, and the data showed an increase in the US stockpile, including a big rise in supplies at Cushing, Oklahoma, the price settlement point for WTI futures on the CME.
US oil inventories rose by 2.6 million barrels last week, after a 1.6 million rise the week before, with output increasing 7.98 million barrels a day, the highest rate of production since January 1989. Supplies at Cushing rose to 38.2 million, an increase of 1.69 million. Despite these rises, there are signs that refinery demand is strong, with capacity utilisation climbing to 88.7% last week. The four-week moving average for fuel demand has risen to its highest level since 2011.
Demand is likely to be supported while the Fed stays with its current pace of monetary stimulus. Janet Yellen signified she is in favour of keeping quantitative easing in place, telling the Senate committee that ‘it’s important not to remove support, especially when the recovery is fragile.’
While Ms Yellen would not dictate the consensus view of the FOMC even if she was to secure Ben Bernanke’s role as the head of the central bank, she would be a driving force for the direction of US monetary policy.