By Barani Krishnan
Investing.com – The EIA delivered a larger weekly crude draw number than thought. But oil traders quickly discounted that news on Wednesday, turning their attention to the minutes from the Federal Reserve’s July meeting due later in the day and the Fed's upcoming Jackson Hole symposium that’s likely to disappoint the case for a rate cut.
New York-traded West Texas Intermediate crude was down 36 cents, or 0.6%, at $55.77 per barrel by 12:56 PM ET (16:56 GMT).
London-traded Brent crude, the benchmark for oil outside of the U.S., gained 35 cents, or 0.7%, to $60.43, staying well above the key $60 per barrel mark.
The Energy Information Administration reported that {ecl-75||U.S. crude inventories}} decreased by 2.7 million barrels during the week ended Aug 16, more than the drop of 1.89 million forecast by analysts. A good chunk of the drop came from Cushing, the storage hub for Oklahoma crude, which by itself saw a 2.5-million barrel deficit.
The EIA also reported that gasoline inventories rose by 300,000 barrels and thatdistillate stockpiles surged by 2.6 million barrels.
While the builds in those fuel products did offset some of the positive impact in the crude draw reported by the EIA, traders’ attention had also moved to the Fed’s July meeting minutes due to be released at 2:00 PM ET (18:00 GMT), said some market participants.
With many traders hoping for a further interest-rate cut to the 25-basis points reduction announced by the Fed in July, disappointment could build if the minutes do not indicate any chance of easing by the central bank at its September meeting.
The Fed’s annual Jackson Hole symposium in Wyoming this weekend is another event that’s likely to disappoint the case for a rate cut, especially if Fed Chairman Jay Powell’s speech on Friday makes no inferences of the central bank turning more dovish than what it already is.
“The main factor that will dictate the next move in the energy sector is the Fed,” said Tariq Zahir, managing member at the oil-focused New York fund Tyche Capital Advisors.
“All eyes will be on Jackson Hole on Friday where we will get some comments out of Powell regarding the Fed’s outlook on the economy. We could expect volatility return to the markets in the weeks to come especially if the bond markets flatten out further from here or go inverted.”
In such a scenario, Zahir added, the reading on the global economy would translate to a slowdown. “This would impact demand forecasts for crude oil, especially going into the weaker demand period of the upcoming 4th quarter and first quarter of next year.”