Oil Jumps to Three-Week High as Tight Fuel Supplies Spark Worry
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(Bloomberg) -- Oil rose as fuel stockpiles continue to tighten, clinging to gains even as hawkish comments from Federal Reserve Chairman Jerome Powell knocked the wind out of Wall Street.
West Texas Intermediate settled at a three-week high of $90 a barrel on Wednesday. Tight supplies rallied crude prices as gasoline inventories tumbled to the lowest since November 2014 and distillate inventories on the East Coast refused to budge from record seasonal lows, according to Energy Information Administration data. 2
Crude held onto gains as the US central bank increased interest rates by 75 basis points. Powell’s comments that “we still have some ways” before rates are tight enough reversed Wall’s Street’s earlier rise.
“We may slow down, but we’re probably going further,” is the basic takeaway from the Fed’s statement and Powell’s press conference, said Adam Crisafulli, founder of VitalKnowledge. “The Fed is hinting at a slower pace of tightening, but Powell was very explicit about rates going to a higher level than previously anticipated.”
Crude recently clocked its first monthly gain in five months, advancing toward $90 after the decision by the OPEC+ alliance to slash production starting in November. Prices had fallen off of war-driven peaks as economists forecast a recession for many of the world’s economies as central banks hike rates to combat inflation and slow down growth. However, as the deadline approaches for Russian oil bans to take effect, supply fears are once again coming to the market’s fore.
Oil options markets have turned steadily more bullish in recent weeks. Premiums of bullish call options over bearish puts have climbed to the highest level since June, according to data compiled by Bloomberg.
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