WTI futures advance for second day on Bernanke comments, inventories data

West Texas Intermediate rose for a second day on Wednesday and Brent held steady above the $107 mark following comments by Federal Reserve Chairman Ben Bernanke indicating stimulus tapering was unlikely to occur in the short-term, boosting oils demand prospects. The market also drew support after the American Petroleum Institute reported a smaller-than-expected rise in U.S. crude inventories as refinery runs picked up. Investors also awaited the beginning of the next round of talks between Iran and six world powers in Geneva today. A resumption in operations at a Libyan port eroded some of oils premium.

On the New York Mercantile Exchange, WTI crude for delivery in January rose by 0.26% to $94.14 per barrel by 8:23 GMT. Prices shifted in a days range between $94.29 and $93.85 a barrel. Light, sweet crude rose by nearly 0.4% on Tuesday and extended its weekly advance to over 0.4% on Wednesday.

Meanwhile on the ICE, Brent futures for settlement in January traded at $107.04 a barrel at 8:24 GMT, up 0.11% on the day. Prices held in range between days high and low of $107.39 and $106.94 a barrel respectively. The European benchmark fell by 1.1% on Tuesday and trimmed its weekly decline to 1.2%.

Oil prices were supported after Federal Reserve Chairman Ben Bernanke said yesterday the central bank will maintain its aggressive monetary policy for as long as needed and will commence scaling back its bond purchases once it is assured the labor market recovery is robust and will continue.

Bernanke also said the Federal Reserve will probably keep down its target interest rate even after bringing its quantitative easing program to an end and most likely after the U.S. unemployment rate falls below 6.5%.

“The target for the federal funds rate is likely to remain near zero for a considerable time after the asset purchases end, perhaps well after the jobless rate breaches the Fed’s 6.5 percent threshold.”

Bernankes comments came after President Barack Obamas nominee for next Fed chief Janet Yellen said she doesn’t 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.

In her prepared comments prior to her last weeks Senate 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.

U.S. inventories

The oil market also drew support after the industry-funded American Petroleum Institute reported on Tuesday that U.S. crude inventories rose less than expected last week. According to APIs private report, U.S. crude stockpiles rose by 512 000 barrels in the week ended November 15, while motor gasoline inventories gained 84 000 barrels after falling for five straight weeks to 209.2 million barrels. Distillate fuel stockpiles decreased by 4.9 million barrels. Refinery crude runs jumped by 255 000 barrels per day last week.

Tan Chee Tat, an analyst at Phillip Futures said for CNBC: “U.S. refineries are coming out of seasonal maintenance and the higher refinery capacity would boost production and draw down stockpiles.”

APIs data however is considered as less reliable than EIAs statistics as it is based on voluntary information from operators of pipelines, refineries and bulk terminals. According to the median estimate of 11 analysts surveyed by Bloomberg, U.S. crude inventories probably rose by 1 million barrels in the seven days through November 15, while motor gasoline and distillate fuel stockpiles likely dropped by 300 000 and 280 000 barrels, respectively.

Iran, Libya

Investors awaited the beginning of the next round of talks between Iranian diplomats and their counterparts from the five permanent members of the U.N. Security Council and Germany.

A senior U.S. official hinted on Friday a deal with Iran was “quite possible” this week but U.S. Secretary of State John Kerry said on Monday he had no specific expectations about reaching an accord, providing some support to prices. If an agreement was to be struck, it would lift U.S. and EU sanctions on Iran’s oil exports, paving the way for the return of more than 1 million barrels of oil per day to the global market. The two sides are to reconvene in Geneva on Wednesday.

Market players also remained wary of Libyas crippled oil output despite a resumption of operations at the western Mellitah port. Prices were pressured on Tuesday after a spokesman for the state-run National Oil Corp. said that the port was reopened after protests ended on Saturday, allowing the second-largest oilfield in western Libya, El Feel, to resume production.

Members of the Amazigh minority closed the Mellitah complex last week, which is run by NOC and Italy’s Eni. Output in Africa’s biggest holder of crude reserves 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.

Clashes between Libyan militiamen and armed residents in Tripoli on Friday resulted in the death of 13 people, while more than 130 were wounded.

Meanwhile, Libya’s deputy intelligence chief was kidnapped outside Tripoli’s international airport on Sunday, only a month after the prime minister was held captive for a day, reinforcing the government’s inability to regain its grip.

“Uncertainty still remains in that country and we do see fluctuations in production,” Tan Chee Tat said for CNBC. “It seems like the current government does not have enough ability to subdue labour unrest in the country.”