Oil prices moved higher on Wednesday after the Federal Reserve said it would leave interest rates unchanged, having earlier recouped losses after falling as U.S. crude inventories built to record highs.
Brent crude futures hit a new 2016 high following the release of the Fed’s statement. They were up $1.45 at $47.19 a barrel. The international benchmark has risen nearly 20 percent in April, its largest one-month gain in a year.
U.S. West Texas Intermediate crude futures settled 2.93 percent higher, or $1.29, at $45.33, also hitting a new 2016 high.
U.S. crude inventories climbed 2 million barrels last week to an all-time peak of 540.6 million barrels, the government-run Energy Information Administration (EIA) said.
The EIA report forced oil prices to retreat from highs hit earlier on buying triggered by the American Petroleum Institute’s (API) projections for a 1.1 million-barrel drop in crude stockpiles. A Reuters poll of analysts had forecast 2.4-million barrels build instead.
“The build in crude oil inventories, even though expected by most analysts, has dashed the bullish hopes that were fostered by the unexpected draw reported yesterday by the API,” said David Thompson, executive vice-president at energy-specialized commodities broker Powerhouse in Washington.
U.S. crude futures turned negative briefly after the EIA report, before climbing again on expectations that a U.S. Federal Reserve policy statement would keep the dollar weak by leaving interest rates unchanged.
Declines in the dollar typically makes prices of commodities denominated in the greenback, such as oil, more attractive to holders of the euro and other currencies.
Some traders expected crude prices to fall in coming days, saying the market had run up too much, too fast on exaggerated bets for stockpile and production declines.
Despite Wednesday’s retreat, Brent is up 16 percent for April, heading for its largest monthly gain in a year.
“With crude inventories building and the Saudis still pumping at record levels, we feel the recent run-up has been mainly fueled by the weakness on the dollar,” said Tariq Zahir, trader and portfolio manager at Tyche Capital Advisors in New York.
U.S. crude futures have risen in six of the past seven sessions, aided partly by a weak dollar.
Brent received extra support from news that Saudi Arabia and Kuwait appear no closer to restarting their jointly operated Khafji oilfield, which produced 280,000 to 300,000 barrels per day before environmental problems forced a closure in October 2014.
The prospect of an agreement among the world’s largest oil exporters to limit production, which had provided the catalyst for a 55 percent rally since mid-February, evaporated almost two weeks ago when a meeting between OPEC members and their non-OPEC counterparts ended in stalemate.
Since then, Brent has hit its highest since November and, aided by further evidence of declining output anywhere from the U.S. shale basin to the North Sea, attracted fresh investment cash.
— CNBC’s Tom DiChristopher contributed to this story.
Source: CNN Investing