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 Both Brent and U.S. crude oil pared gains immediately after the 2
p.m. EST (1900 GMT) announcement, then bounced back several minutes
later.
The U.S. Federal Reserve announced plans to trim its aggressive
bond-buying program on Wednesday but sought to temper the
long-awaited move by suggesting its key interest rate would stay
lower for even longer than previously promised.
The central bank said it would reduce its monthly asset purchases by
$10 billion to total $75 billion. It trimmed equally from mortgage
and Treasury bonds.
"The Fed is indicating that their data is showing a strong enough
economy that they're pulling back (monetary stimulus)," said John
Kilduff, a partner with Again Capital LLC in New York.
"That's bullish for crude oil and refined product."
Strong demand for Brent from Mediterranean refiners in the absence
of Libyan supply also boosted the international benchmark.
Mediterranean refiners have more than doubled purchases of North Sea
crude grades since November, an unusual move that is expected to
extend into 2014 with British and Norwegian oil as the go-to
substitute for absent Libyan barrels.
U.S. crude gained scant support from data from the U.S. Energy
Information Administration (EIA) showing crude inventories in the
world's largest oil consumer dropped 2.9 million barrels to 372.3
million barrels, compared with forecasts of a 2.3 million barrel
draw. The higher-than-expected draw was countered by data showing
refinery runs fell 1.1 percent from the previous week.
Brent crude rose $1.19 to settle at $109.63, after settling nearly
$1 lower on Tuesday.
U.S. oil rose 58 cents to close at $97.80, after earlier rising 79
cents to a high of $98.01 on strong housing data from the U.S.
U.S. RBOB gasoline futures gained 5.01 cents to close at $2.6973.
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LIBYA RISK; PIPELINE TO START IN JANUARY
The spread between the two benchmarks settled at $11.83, nearly $1
wider than Tuesday's close.
Geopolitical risk in Libya, where on Sunday an autonomy movement in
the east said it would not end a blockade of several oil-exporting
ports, supported Brent.
U.S. crude also gained support from rising equity prices, but the
filling of the 700,000 barrel-per-day TransCanada Corp pipeline from
the Cushing, Oklahoma storage hub to the Gulf Coast kept gains in
check.
TransCanada expects its new pipeline to begin service on Jan. 22,
its chief executive said in an interview on Tuesday.
The company is currently filling the Cushing to Port Arthur, Texas,
pipeline with the 3 million barrels of crude oil needed before it
can be placed into normal operation.
"Libyan rebels still haven't turned over some territory in the
oil-producing region, so you're getting some geopolitical support
for Brent, coupled with the fact that we'll soon be getting a few
hundred thousand barrels a day down to Port Arthur," said Stephen
Schork, editor of the Schork Report in Villanova, Pennsylvania.
U.S. equities also rose after briefly plunging on Wednesday after
the Fed's announcement.
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