WTI pares weekly losses on Fed stimulus outlook, inventories data weigh

West Texas Intermediate crude trimmed its weekly decline and Brent is set for its best week since July after Fed Vice Chairwoman Janet Yellen defended Feds current bond purchasing pace at a Senate hearing on Thursday, curbing speculations for an earlier-than-projected stimulus tapering. Gains were limited after the EIA reported U.S. crude oil inventories rose for an eight consecutive week to the highest since June last week as output surged to the highest since 1989. Supply outages in Libya and Iraq also supported the market.

On the New York Mercantile Exchange, WTI crude for delivery in December traded at $93.88 per barrel at 8:44 GMT, up 0.12% on the day. Prices shifted in a days range between $94.29 and $93.75 a barrel. The U.S. benchmark rose by 0.4% on Thursday, a third daily increase in four, and trimmed its weekly decline to little over 0.5% on Friday.

Meanwhile on the ICE, Brent futures for settlement in January rose by 0.27% to $108.58 per barrel by 8:44 GMT. Prices held in range between session high of $108.66, near Thursdays two-week high of $108.94 a barrel, and days low of $107.93 a barrel. The European benchmark rose by 1.4% yesterday, the most since November 8, and extended its weekly advance to nearly 3.4% on Friday, set for the best week since July.

Oil prices drew support yesterday as Janet Yellen, Fed Vice Chairwoman and President Barack Obama’s nominee to lead the Federal Reserve, indicated shell press on with Feds massive quantitative easing program until she sees a robust economic recovery. Yellen said she doesnt see evidence at this point that the current policy is inflating assets bubbles, further curbing speculations for an earlier-than-expected tapering of the stimulus.

“Although there is limited evidence of reach for yield, we don’t see a broad buildup in leverage, where the development of risks that I think at this stage poses a risk to financial stability,” she said.

In her prepared comments prior to the hearing, Yellen called last month’s 7.3% unemployment rate too high, noting the economy and labor market were performing short of their potential, while inflation remained well below Fed’s 2% target and provided room for easy money supply.

Michael McCarthy, a chief strategist at CMC Markets in Sydney, commented for Bloomberg: “Dovish comments from Yellen are providing support. Some of those funds that are being redeployed across asset classes are flowing into oil. The fundamentals, the supply side in particular, are pointing in the other direction and that’s another reason why today looks like investment support.”

Inventories data

Gains were however limited after the Energy Information Administration reported on Thursday that U.S. crude stockpiles rose for an eight consecutive week to the highest since June. Crude inventories jumped by 2.6 million barrels in the week ended November 8, exceeding more than three times an anticipated 800 000 barrels increase, according to a Bloomberg survey of analysts. Supplies rose to 388.1 million barrels, the highest since June, while output surged to the highest since January 1989. Refineries operated at 88.7% of their operable capacity, up from 86.8% a week earlier. Inventories at Cushing, Oklahoma, the biggest U.S. storage hub and delivery point for NYMEX-traded contracts, rose by 1.7 million barrels to 38.2 million.

The report also showed that both gasoline and distillate fuel production rose last week, averaging 9.4 million and 4.9 million barrels per day, respectively. Motor gasoline stockpiles fell by 838 000 barrels last week and were above the upper range for this time of the year. Analysts expected a decline of 900 000 barrels. Distillate fuel inventories slid by 481 000 barrels compared to projections for a 1 million decline and remained near the lower limit of the average range for this time of the year.

The market however drew support after the International Energy Agency said that despite the ample global supply in the short-term, prices might rebound in the next few months on a seasonal increase in demand and outages from OPEC members.

Libya, Iraq

Ongoing protests in Libya, Africas biggest crude reserves holder, continued to underpin the market. Output fell to an average of 450 000 barrels of oil per day in October, down from 1.45 million bpd a year earlier, data by Bloomberg showed.

Ibrahim Al Awami, the Libyan oil ministry’s head of measurement and inspection, said on Wednesday that protests kept the Zawiya refinery closed for more than a day, leaving its 120 000 bpd capacity offline. The port was later reopened after the demonstration had come to an end.

Also supporting prices, Israeli Prime Minister Benjamin Netanyahu warned on Wednesday that a “bad deal” with Iran on its nuclear programme could lead to war. This comes after recent diplomatic progress between Iran and Western world powers spurred hope for a breakthrough that can put an end to a decade-long deadlock and ease U.S. and E.U. sanctions on the Islamic republic’s oil exports, which removed 1 million bpd from global oil supply.

Iranian diplomats and their peers from the U.S., U.K., France, Russia, China and Germany failed to reach an agreement on the nation’s disputed nuclear program in Geneva last week. However, negotiations are set to resume on November 20. U.S. Secretary of State John Kerry said he hoped for an agreement over Iran’s nuclear program within months.

Meanwhile, Iraqs government attempted to quickly restore peace at its giant southern oilfields after angry Shiite Muslim workers and tribesmen attacked the Schlumberger camp in North Rumaila on Monday after accusing a foreign security adviser of insulting their religion. Schlumberger Ltd, the worlds top oil services company is expected to resume operations at the Rumaila oilfield next week.

According to a Bloomberg survey of analysts, U.S. crude will likely advance next week on speculations the Federal Reserve will leave its stimulus intact for some time. Nine out of 23 participants polled wagered prices will rise next week, while eight were bearish and the remaining six predicted no significant change.