WTI futures hover near six-week high ahead of US inventories data, Yellen testimony

West Texas Intermediate crude traded near the highest level in six weeks after rising for five straight days on expectations a government report tomorrow will show a fifth consecutive decline in US distillate fuel stockpiles as cold weather boosted demand for heating fuels. Expectations for a dovish testimony by Janet Yellen in her first appearance before Congress as head of the Federal Reserve further supported the market.

On the New York Mercantile Exchange, WTI crude for delivery in March fell by 0.07% by 7:54 GMT to trade at $99.99 per barrel. Prices held in a daily range between $100.14 and $99.89 per barrel. US crude rose to a six-week high of $100.55 on Monday and settled the day 0.2% higher at $100.06, the highest close since December 27. Prices are up 1.7% so far this year.

Meanwhile on the ICE, Brent futures for settlement in the same month rose by less than 0.1% to $108.66 per barrel, shifting in a narrow daily range between $108.79 and $108.52 a barrel. The European benchmark lost 0.9% on Monday to settle at $108.63, narrowing its premium to WTI to $8.57 a barrel from $9.69 on Friday, based on closing prices.

Oil drew support amid expectations the Energy Information Administration will report on Wednesday a fifth consecutive weekly decline in the nations distillate fuel inventories as persisting cold weather across most of the US boosted heating demand. According to a weekly Bloomberg survey of eight analysts, distillate supplies, a closely watched category gauging winter fuel demand, probably decreased by 2.13 million barrels in the seven days through February 7th. Motor gasoline stockpiles are expected to have fallen by 250 000 barrels.

David Lennox, a resource analyst at Fat Prophets in Sydney, said for Bloomberg: “There’s been a lot of finished product consumed. The seasonal factor is at play. Investors are also looking at the demand potential in the U.S.”

However, weather forecasts showing conditions across the US might turn milder next week have limited demand for heating oil in the recent days.

Crude inventories likely jumped by 2.6 million barrels, the polled participants estimated, as the shale oil boom continues to expand domestic production. Shale oil output is anticipated to jump by 63 000 barrels per day this month and another 64 000 bpd in March, according to forecasts by the EIA released yesterday. That would exceed a 53 000-bpd jump last month and a rise of 49 000 bpd in December.

The industry-funded American Petroleum Institute will release its separate inventories report later today. APIs statistics however are deemed less popular than EIAs figures as they are based on voluntary information provided by operators of pipelines, refineries and bulk terminals, while the government requires reports to be filed with the EIA.

Fed stimulus

Market players also awaited Janet Yellens first testimony to Congress as head of the Federal Reserve. Investors broadly expected a slower stimulus tapering to be announced after a mixed set of data released in the last couple of weeks overshadowed policy makers decisions to trim Feds bond buying program at their two latest meetings.

If Yellens testimony proves dovish as anticipated, it would weaken the US dollar, allowing dollar-denominated commodities to regain positions and give reassurance to riskier assets, including the oil markets.

The US dollar index, which measures the greenbacks strength against a basket of six major currencies, traded at 80.66 at 7:54 GMT, down 0.08% on the day. The March contract held in a daily range between 80.69 and a two-week low of 80.57. The US currency gauge fell by 0.8% last week.