Investing.com – Crude oil prices gained on an upbeat assessment of U.S. economic growth prospects as markets digested the Federal Reserve’s language for the timing of a now widely expected rate hike this year, with some speculation it could come as late as December or as early as September.
On Wednesday, Federal Reserve policymakers did not raise short-term interest rates from near zero at their Federal Open Market Committee, but their policy statement seemingly left the FOMC on course to raise them before long.
The Fed has kept the overnight federal funds rate, and in turn other rates, near zero since December 2008.
In the statement, the FOMC reaffirmed two conditions for starting to raise rates, that include further labor market improvement and becoming “reasonably confident” inflation will rise to 2% “over the medium term.” And the FOMC’s largely upbeat policy statement suggests the economy is on track to meet those conditions.
On the New York Mercantile Exchange, WTI crude for September delivery rose 0.23% to $48.90 a barrel.
Overnight, futures surged on Wednesday resuming its push back to $50 a barrel, amid a sharp, unexpected draw in inventories last week and indications that Saudi Arabia could cut production at the end of the summer.
On the Intercontinental Exchange (ICE), for September delivery wavered between $52.52 and $54.30 a barrel before settling at $53.36, up 0.06 or 0.11%. Meanwhile, the spread between the international benchmark of crude stood at $4.61, below Tuesday’s level of $5.35 at the close.
The U.S. Energy Information Administration (EIA) said in its Weekly Petroleum Status report on Wednesday that U.S. crude stockpiles fell by 4.203 million barrels, below expectations for a 1.88 million draw. A week earlier, EIA reported that U.S. crude stockpiles unexpectedly rose by 2.5 million barrels for the week ending on July 17, pushing inventory levels nationwide to 463.9 million.
Following last week’s draw, U.S. crude oil inventories still remain near levels not seen for this time of year in at least the last 80 years.
Also on Wednesday, the Wall Street Journal reported that Saudi Arabia could slash crude output by 200,000 to 300,000 barrels a day, to roughly 10.3 million bpd as early as September. In June, the kingdom produced more than 10.5 million barrels a day, amounting to its highest level on record.
Last November, the Organization of the Petroleum Exporting Countries triggered a protracted battle for global market share when it decided to keep its production ceiling unchanged at 30 million barrels per day. Many industry observers believe the strategic decision was aimed at undercutting U.S. shale producers, which can drill more efficiently when crude prices are higher. As both powers have flooded the market with a glut of oil, crude futures have fallen by roughly 40%.
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