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Crude oil futures rally amid likely rate hike by the Fed

Investing.com –

Investing.com — Oil prices surged on Wednesday after the Federal Reserve said it will likely raise interest rates at some point this year by removing a reference of staying patient from its minutes.

While Federal Reserve chair Janet Yellen indicated that its benchmark Federal Funds Rate could be increased later this year, it will not occur until after the Federal Open Market Committee’s next meeting in April, at the earliest. Yellen added that the timing of the decision will be “data dependent,” and that a rate hike will not necessarily be made in June.

Drawing comparisons with Alan Greenspan by striking a well-balanced tone for the Fed’s short-term outlook, Yellen appeared hawkish with the removal of patience, but dovish with forecasts for weaker inflation and GDP growth.

With Yellen’s comments weighing on the dollar, April deliveries for WTI crude on the New York Mercantile Exchange rose 2.93% or 1.23 to $44.69 a barrel. On the Intercontinental Exchange (ICE), brent crude for April deliveries soared 5.16% or 2.76 to $56.27 a barrel. The spread between the international and U.S. domestic benchmarks reached its highest level in more than two weeks.

The late rally reversed losses earlier in the day when growing supply data pushed down oil futures to a six-year low. In its weekly inventory report, the Energy Information Administration (EIA) said that oil supply in the U.S. last week grew by 9.6 million barrels to reach an 80-year high at 458.5 million.

At the Cushing Oil Hub in Oklahoma, inventories last week grew by 2.8 million barrels as storage levels reportedly exceeded 70% capacity. The increased storage level has stoked fears that Cushing could reach full capacity sooner than expected, a development that may cause oil prices to plunge. By comparison, inventory levels at Cushing this time last year were at roughly 25% capacity.

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