Crude Oil Ends Higher After Fed Decision

(RTTNews) - U.S. crude oil surrendered gains but still closed higher on Wednesday, after the Federal Reserve ended its quantitative easing program while appearing upbeat on the economy, a cue that interest rates may be hiked sooner than markets anticipate.

Meanwhile, oil prices were also supported by a report from the Energy Information Administration which showed U.S. crude stockpiles to have increased less than expected last week.

The U.S. Federal Reserve on Wednesday announced its final round of quantitative easing as expected, slashing purchases of Treasury and mortgage-backed securities to zero from $15 billion.

Policy makers repeated their pledge to keep interest rates around record lows for "a considerable time," but said interest rates may rise sooner than markets expect if the economic recovery continues to gather steam.

The Fed ended its QE3 program after U.S. unemployment rate dipped to 5.9 percent in September, a six-year low.

With a definite change in tone that previously warned about persistent slack in the labor market, the Fed now believes under-utilization of labor resources to be gradually diminishing. Policy makers also sounded more hawkish on inflation despite a significant recent drop in prices at the pump.

Earlier today, a weekly report from the U.S. Energy Information Administration showed U.S. crude oil inventories to have risen by 2.1 million barrels in the week ended October 24, which was below analysts expectation of an increase of 3.4 million barrels. The EIA report showed U.S. crude oil inventories at 379.7 million barrels, end last week.

Gasoline stocks dropped by 1.2 million barrels last week, while analysts anticipated a decrease of 1.0 million barrels. Inventories of distillate, including heating fuel, dropped 5.3 million barrels last week. Analysts anticipated a decline of 1.4 million barrels.

A report from the American Petroleum Institute late Tuesday, showed crude oil inventories to have risen 3.2 million barrels last week.

Light Sweet Crude Oil futures for December delivery, the most actively traded contract, gained $0.78 or 1.0 percent to close at $82.20 a barrel on the New York Mercantile Exchange Wednesday.

Crude prices for December delivery scaled a high of $82.88 a barrel intraday and a low of $81.44.

On Tuesday, crude oil futures ended higher after very nearly falling to a low of $80.36 a barrel intraday. Firm global equity markets and the dollar's weakness against some major currencies supported oil yesterday.

Earlier this month, crude oil prices had tumbled to $79.10 a barrel, the lowest since June 2012, amid demand growth worries and on concerns about excess supply globally. Oil was also weighed by a report from Goldman Sachs that predicted West Texas crude will fall to $70 a barrel by the first quarter of 2015.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 85.30 on Wednesday, down from its previous close of 85.41 late Tuesday in North American trade. The dollar scaled a high of 85.46 intraday and a low of 85.19.

The euro trended higher against the dollar at $1.2743 on Wednesday, as compared to its previous close of $1.2734 late Tuesday in North American trade. The euro scaled a high of $1.2770 intraday and a low of $1.2724.

In some other economic news, industrial production in Japan was up a seasonally adjusted 2.7 percent on month in September, the Ministry of Economy, Trade and Industry said Wednesday. That beat forecast for an increase of 2.2 percent following the 1.9 percent contraction in August.

On a yearly basis, industrial production in Japan added 0.6 percent - again beating forecast for a decline of 0.1 percent following the 3.3 percent drop in the previous month.