Oil rises three percent

Oil rose 3 percent on Wednesday, boosted by data showing a drop in US crude and gasoline stockpiles as the market weighed comments from the US Federal Reserve. Crude rallied early on news of lower throughput on a key import pipeline from Canada and a steeper than anticipated drop in US crude stockpiles last week, according to data from the US Energy Information Administration.
Oil markets then extended gains after the Fed pledged to keep interest rates low in view of a slower pace of economic recovery, before giving up those gains in post settlement trade as the dollar gained as market mulled comments from Chairman Ben Bernanke. "The result of the low-interest rate policy continuing is a weaker environment for the dollar going forward... this sent the markets a signal for bulls to sow their oats a little," said Phil Flynn, analyst at PFGBest Research in Chicago.
In London, ICE Brent crude for August delivery settled at $114.21 a barrel, gaining $3.26. Brent hit a session high of $114.48, just below its $114.52 100-day moving average, according to Reuters data, but fell down to $113.50 after the settlement. US August crude gained $1.24 to settle at $95.41 a barrel, dropping down to $94.54 in post-settlement activity. Brent's premium against US crude hit $18.80 after ending at $17.05 on Tuesday.
Trading volume in US crude were light, at 30 percent below the 30-day average while volume in Brent crude was off 4 percent from the 30-day average. Oil earlier found support from US oil inventory data, which showed US crude stockpiles fell 1.7 million barrels in the week to June 17 as refinery utilisation jumped 3.1 percent to 89.2 percent of capacity, data from the US Energy Information Administration showed. Gasoline inventories fell by 464,000 barrels during the week as demand rose 0.9 percent year on year.
"Gasoline looks constructive with reasonable demand for June and a larger than expected draw," said Andy Lebow, broker at MF Global in New York. The surprise fall in US gasoline stocks pushed gasoline futures more than 3 percent higher on the day. Additional support came as TransCanada Corp said oil shipments on its Keystone pipeline, which carries oil from Alberta to Oklahoma, will be cut by 19.28 percent as it works on the line following two oil spills in May.
In its policy statement, the Fed projected that the current spike in commodity prices would be temporary and expects US economic growth to improve in the second half of this year. However, it offered no clues on whether it there would be another round of quantitative easing.