Crude Oil Ends Higher On Fed Cues

(RTTNews) - U.S. crude ended higher Thursday, on improved demand outlook and after the U.S. Federal Reserve decided to slash its monthly bond-buying program by $10 billion, following its two-day policy review meet yesterday.

Late Wednesday, the Federal Reserve slashed its massive bond-buying program by $10 billion to $75 billion per month, citing recent improvement in the U.S. jobs market. Beginning in January, the Fed will buy mortgage-backed securities at a pace of $35 billion per month rather than $40 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $40 billion per month rather than $45 billion per month.

The Fed expects to see sustained jobs creation and an uptick in the rate of inflation before further scaling back their unprecedented support measures. Any further reduction in the size of stimulus will be contingent on economic data.

Light Sweet Crude Oil futures for February delivery, the most actively traded contract, gained $0.98 or 1.0 percent to close at $99.04 a barrel on the New York Mercantile Exchange Thursday.

Crude prices for February delivery scaled a high of $99.17 a barrel intraday and a low of $97.50.

Light Sweet Crude Oil futures for January delivery, gained $0.97 or 1.0 percent to close at $98.77 a barrel.

Crude prices for January delivery scaled a high of $99.49 a barrel intraday and a low of $97.76.

Yesterday, oil bounced back to a near one-week high after the Federal Reserve decided to maintain its low interest rates, while affecting a $10 billion cut to its monthly bond-buying program. Investors also weighed a report from the Energy Information Administration that showed U.S. crude oil stockpiles to have dropped last week, albeit less than expected.

The Energy Information Administration on Wednesday said U.S. crude oil inventories dipped 2.90 million barrels, while gasoline stocks added 1.30 million barrels in the week ended December 13. Analysts expected crude oil inventories to drop by 3 million barrels and gasoline stocks to gain 1.5 million barrels last week.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 80.58 on Thursday, down from 80.59 late Wednesday in North American trade. The dollar scaled a high of 80.67 intraday and a low of 80.47.

The euro traded lower against the dollar at $1.3663 on Thursday, as compared to its previous close of $1.3684 late Wednesday in North America. The euro scaled a high of $1.3694 intraday and a low of $1.3650.

In economic news, initial claims for U.S. unemployment benefits unexpectedly saw some further upside in the week ended December 14. A Labor Department report on Thursday showed initial jobless claims climbed to 379,000, an increase of 10,000 from 369,000 reported the previous week. The revised figures showed an increase of 64,000 in the previous week. Economists expected jobless claims to drop to 337,000 from the 368,000 originally reported for the previous week.

Existing home sales in the U.S. fell more than expected in November, a report from the National Association of Realtors showed Thursday. Existing home sales dropped 4.3 percent to a seasonally adjusted annual rate of 4.90 million in November, after falling 3.2 percent to 5.12 million in October. Economists expected sales to dip to an annual rate of 5.02 million.

The Commerce Department said housing starts in the U.S. surged up 22.7 percent to a seasonally adjusted annual rate of 1.091 million in November from a rate of 889,000 in October. Economists had expected housing starts to come in at an annual rate of 955,000.

A Federal Reserve Bank of Philadelphia report on Thursday showed regional manufacturing activity grew at a slightly faster rate in December, although the index of activity in the sector rose much lesser than expected. The Philly Fed diffusion index of current activity edged up to 7.0 in December from 6.5 in November. A positive reading indicates an increase in regional manufacturing activity, but economists expected the index to climb to 10.0.

Meanwhile, the Conference Board report showed its index of leading U.S. economic indicators rose slightly more than expected in November. The leading economic index rose 0.8 percent in November after edging up 0.1 percent in October and jumping 1.0 percent in September. Economists expected the index to increase by 0.7 percent.

Elsewhere, policymakers of the Bank of England unanimously decided to maintain the interest rate at 0.50 percent and quantitative easing at GBP 375 billion, the minutes of the meeting held on December 4 and 5 showed.

British retail sales rebounded in November, data from the Office for National Statistics revealed. Sales volume, including auto fuel, rose 0.3 percent month-on-month in November, recovering from a revised 0.9 percent drop in October. The outcome was in line with expectations.