WTI, Brent oil futures erase gains in choppy trade after ECB move

Investing.com - Crude oil futures erased gains in volatile trade on Thursday, as the U.S. dollar surged after the European Central Bank unveiled a quantitative easing program at the conclusion of its highly-anticipated policy meeting.

On the New York Mercantile Exchange, crude oil for delivery in March dropped 34 cents, or 0.71%, to trade at $47.44 a barrel during U.S. morning hours, after hitting a session high of $49.07, up $1.29.

A day earlier, New York-traded oil futures jumped $1.31, or 2.82%, to settle at $47.78 a barrel. WTI prices touched $44.20 on January 13, a level not seen since March 2009.

Elsewhere, on the ICE Futures Exchange in London, Brent oil for March delivery shed 3 cents, or 0.05%, to trade at $49.01 a barrel. Earlier in the day, Brent touched a high of $50.45, up $1.42.

On Wednesday, London-traded Brent prices rallied $1.04, or 2.17%, to close at $49.03 a barrel. Brent hit $45.19 on January 13, the weakest level since April 2009.

Oil turned lower after the ECB announced that it would launch a €60 billion monthly bond buying program that would start in March and last until September 2016, in a bid to stave off the threat of deflation in the euro area and boost growth.

In total, the program could total €1.08 trillion, much higher than market expectations for a figure of around €500 billion.

ECB Governor Mario Draghi said the risks to the euro area recovery remain to the “downside” but added that today’s action should bolster the outlook. He noted that lower oil prices should help households and support a wider recovery.

The QE announcement pressured the euro and sent the dollar higher, weighing on dollar-denominated commodities.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.75% to hit a 12-year high of 93.69.

Also Thursday, the U.S. Department of Labor said the number of individuals filing for initial jobless benefits decreased by 10,000 to 307,000 last week from the previous week’s total of 317,000.

Analysts had expected initial jobless claims to decline by 17,000 to 300,000 last week.

Market participants awaited the release of weekly supply data out of the U.S. later in the session to gauge the strength of oil demand from the world’s largest consumer.

Thursday’s government report was expected to show that U.S. crude oil stockpiles rose by 2.6 million barrels last week, while gasoline stockpiles were forecast to increase by 1.3 million barrels.

The report comes out one day later than usual due to Monday's Martin Luther King, Jr. holiday in the U.S.

After markets closed Wednesday, the American Petroleum Institute, an industry group, said that U.S. crude inventories rose by 5.7 million barrels in the week ended January 16.

The report also showed that gasoline stockpiles increased by 2.1 million barrels, while distillate stocks fell by 1.8 million barrels.

Oil prices have fallen nearly 60% since June as the Organization of Petroleum Exporting Countries resisted calls to cut output, while the U.S. pumped at the fastest pace in more than three decades, creating a glut in global supplies.

On Wednesday, OPEC Secretary-General Abdalla El-Badri said that prices will rebound rather than extend declines to as low as $20 a barrel.