Oil rallies on supply data despite Fed anticipation

Crude oil futures soared to a session high on Wednesday, after official data indicated crude oil inventories fell significantly more-than-expected last week, however advances were subdued ahead of the Federal Reserve’s policy decision later in the day.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in September traded at USD89.30 a barrel during U.S. afternoon trade, up 1.43%.
Launching the oil rally, the U.S. Energy Information Administration said U.S. crude oil inventories decreased by 6.5 million barrels in the week ending July 27, far more than forecasts for a decline of 0.7 million barrels.
Total gasoline stocks fell by 2.2 million barrels, while distillate stocks, which include heating oil and diesel, decreased by 1 million barrels, the EIA said.
Refiners trimmed operations, with refinery inputs averaging about 15.6 million barrels per day, 225,000 barrels per day below the previous week’s average.
Crude oil’s gains remained limited amid caution ahead of the Federal Reserve’s policy decision later in the session.
The U.S. central bank was expected to stop short of announcing a third round of quantitative easing measures, but to indicate that it remained ready to act to spur economic growth if necessary.
Earlier in the day, the Institute for Supply Management said that its U.S. manufacturing purchasing managers’ index rose to 49.8 in July from 49.7 in the preceding month, but remained below the 50 level that separates contraction from expansion.
Analysts had expected the ISM manufacturing PMI to come in at 50.2.
The data came after payroll processor ADP said the U.S. private sector added a seasonally adjusted 163,000 jobs in July, beating expectations for an increase of 120,000.
June’s figure was revised down to 172,000, slightly lower that the initial estimate of 176,000.
The U.S. is the world’s biggest oil-consuming country, responsible for almost 22% of global oil demand.
Investors also remained wary ahead of Thursday’s European Central Bank meeting, amid growing concerns that the bank will disappoint expectations for bold steps to counter the debt crisis in the euro zone.
Expectations have been mounting that the ECB will announce measures to lower Spanish and Italian borrowing costs after the bank’s head Mario Draghi pledged last week to do whatever is necessary to preserve the euro.
On Tuesday, the American Petroleum Institute’s weekly report said U.S. crude oil inventories fell 11.6 million barrels in the week ended July 27, a far bigger drop than expected, as imports declined.
On the London based ICE Futures Exchange, Brent oil futures for September delivery were up 1.01% to trade at USD105.98 a barrel, with the spread between the Brent and crude contracts standing at USD17.12.