Crude oil prices reach 9-month high following a drop in US oil inventories

Crude oil prices have hit a 9-month high. As at 07.30 GMT, WTI crude futures were up by 1.35% to trade at $48.52 per barrel. Similarly, the Brent crude futures rose by 1.41% to $51.78 per barrel. The commodity’s upward momentum is a reaction to the fall in the US oil inventories. Furthermore, the dovish Fed decision and hopes of a stimulus package have contributed to the crude oil prices’ rally.

US records a drop in crude oil inventories

Crude oil prices are reacting to the bullish data released by the Energy Information Administration on Wednesday. According to the agency, the US crude oil inventories dropped by 3.135 million barrels in the past week. The figure was higher than experts’ expected decline of 1.937 million barrels. In the previous week, the stockpiles had risen by 15.189 million barrels.

At the same time, gasoline inventories rose by 1.020 million barrels, which is better than the expected 1.614 million barrels. In the previous press release, gasoline stockpiles had risen by 4.222 million barrels.

Furthermore, the weekly distillates stocks increased by 0.167 million barrels, down from the preceding week’s 5.222 million barrels. Analysts had forecasted a reading of 0.886 million barrels. For the bulls looking to trade oil, the data is a sign of rising demand for crude oil.

Dovish Fed decision fuels crude oil prices

Investors in the crude oil market are also reacting to the Federal Reserve’s decision released on Wednesday. The central bank announced that it will leave the enacted pandemic-response measures unchanged.

Just like analysts had forecasted, interest rates will remain the same at the 0.0% – 0.25% range. Besides, the bank has maintained its commitment to the bond-buying program. The Fed will purchase bonds of about $120 billion per month. According to the released statement, this quantitative easing move will continue “until substantial further progress has been made toward the Committee’s maximum employment and price stability goals.”

Notably, news on the low interest rates have led the US dollar to drop even further. The dollar index is trading below the psychological level of $90 at $89.83. With crude oil prices having an inverse relationship to the dollar, the weakening dollar is good news to bulls in the oil market.

Additionally, the central bank’s new economic outlook has offered support to crude oil prices. In September, the institution estimated that the US economy would fall by 3.7% in 2020. However, in yesterday’s statement, it adjusted the decline to 2.4%. Besides, the Fed forecasts that the US economy will rise by 4.2% in the coming year compared to its prior estimate of a 3.2% growth.