Crude oil futures rose in choppy trading on Wednesday, getting a lift from US equities despite pressure from a larger-than-expected increase in US crude inventories and a report that Iran may consider a halt to its nuclear program.
Prices moved little after the US Federal Reserve, as
expected, said at the end of a two-day policy meeting that it will keep
interest rates exceptionally low at least through late 2014, Reuters reported.
"Oil got support from equities, which are on a rally
mode and as support developed after the day's lows around $103 was not
violated," said Hamza Khan, analyst at the Schork Group in Villanova,
Pennsylvania, said according to the news wire.
The central bank said the US economy had been expanding
moderately and that the labor market had improved in recent months. It noted,
however, that while the jobless rate had declined, it remained elevated.
Later, Fed chairman Ben Bernanke said at a press
conference that the central bank remains prepared to do more to ensure that the
economic recovery continues.
"The recent rise in gasoline prices has created a
temporary bulge in headline inflation and overall inflation, but we expect to
pass through the system and assuming no new shocks in the oil sector -
inflation ought to moderate about 2% this year," Bernanke said.
US crude inventories rose almost 4 million barrels in the
week to 20 April, up for the fifth week in a row, the US Energy Information
Administration said. A forecast in a Reuters poll had called for a
In London, ICE Brent crude for June delivery settled at
$119.12 a barrel, gaining $0.96, the highest close since 13 April. Brent
rebounded after two straight days of losses.
Brent was also supported by news of delays in North Sea
Forties loading in May due to production problems at the UK's largest oilfield,
trade sources said, disrupting supply of the oil that helps set global prices.
US June crude settled up $0.57 at $104.12 a barrel,
highest since 17 April.
"US June crude's $103.49 was a pivot and the test of
$104.49/$104.51 was key," said Tony Rosado, options broker at New
York-based GA Global Markets.
Brent's premium against US crude widened to $15 at the
close, from $14.61 on Tuesday.
Brent's volume outpaced US crude, hitting 15% above its
30-day average, according to Reuters data.
US crude volume was down 9% from its 30-day average.
In early trade, prices fell after a report from Bloomberg
said Iran was considering a Russian proposal to halt its nuclear work to avert
new European Union sanctions. The report was sourced to Tehran's envoy in
The West alleges that Iran is developing atomic weapons,
but Iran insists its nuclear program is for civilian use.
The tensions spawned by Tehran's nuclear program had
lifted prices in March to their highest this year, as wranglings with the West
created fears of supply disruption from the No. 2 producer in the Organization
of the Petroleum Exporting Countries.
Both the European Union and the United States have
imposed sanctions going into effect this summer, but Iran had agreed to resume
long-stalled talks about its disputed program with six world powers.
Some comments from Israel on Iran have also become more
conciliatory. Israel's military chief said in an interview published on
Wednesday he does not believe Iran will decide to produce an atomic bomb.