Crude Oil Ends Higher As Inventories Decline

(RTTNews) - U.S. crude oil ended higher Wednesday, after an official Energy Information Administration weekly report showed U.S. crude inventories to have dropped more than expected last week. Crude oil inventories showed a massive decline in the weeks earlier, which has been a major factor for the steep rise in prices. Investors also weighed the Federal Reserve Chairman Ben Bernanke's clarification that there was no set time line before the central bank start to taper down its quantitative easing program.

Latest data from the EIA showed U.S. crude oil inventories dropped for a third week in a row, shedding 6.90 million barrels, while gasoline stocks were up 3.10 million barrels in the week ended July 12. Analysts expected crude oil stocks to shed 2.5 million barrels, with gasoline stocks little changed.

Meanwhile, China's Finance Minister Lou Jiwei said his country will not adopt any massive fiscal stimulus this year, a statement published on the ministry's website said. Instead, the nation will fine-tune its policies to promote growth and employment, as indicated by Jiwei to U.S. officials in Washington on July 11.

Addressing lawmakers on Capitol Hill Wednesday, Federal Reserve Chairman Ben Bernanke said the U.S. economic recovery has continued at a moderate pace but the jobs situation remains "far from satisfactory."

"With unemployment still high and declining only gradually, and with inflation running below the Committee's longer-run objective, a highly accommodative monetary policy will remain appropriate for the foreseeable future," Bernanke said in prepared remarks ahead of his semi-annual testimony before the House Committee on Financial Services.

Although vague about the time line for scaling back the Fed's $85 billion a month bond buying plan, Bernanke said he expects the program will be reduced by year's end. Nonetheless, he assured the asset purchases will be wound down gradually so as to not derail the fragile economic recovery.

Light Sweet Crude Oil futures for August delivery, the most actively traded contract, gained $0.48 or 0.5 percent to close at $106.48 a barrel on the New York Mercantile Exchange Wednesday.

Crude prices for August delivery scaled a high of $106.55 a barrel intraday and a low of $105.11.

Yesterday, oil settled marginally lower with investors awaiting cues from the testimony of Federal Reserve Chairman Ben Bernanke, notwithstanding some encouraging macroeconomic data out of the U.S.

The American Petroleum Institute late Tuesday said US crude oil stocks fell 2.60 million barrels and gasoline stocks added a similar 2.6 million barrels in the weekended July 12.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 82.66 on Wednesday, up from 83.53 late Tuesday in North American trade. The dollar scaled a high of 82.89 intraday and a low of 82.34.

The euro traded lower against the dollar at $1.3117 on Wednesday, as compared to $1.3163 late Tuesday in North America. The euro scaled a high of $1.3176 intraday and a low of $1.3084.

In economic news from the U.S., the Commerce Department said housing starts tumbled 9.9 percent to an annual rate of 836,000 in June from the revised May estimate of 928,000. The steep drop came as a surprise to economists, who had expected housing starts to climb to an annual rate of 951,000 from the 914,000 originally reported for the previous month. The Department also said building permits fell 7.5 percent to an annual rate of 911,000 in June from the revised May rate of 985,000.

Elsewhere, euro zone construction output fell 0.3 percent month-on-month in May, following a 1 percent rise in April, Eurostat reported. On a yearly basis, construction output declined 5.1 percent, but slower than the 6.8 percent drop seen in April.

The number of people claiming jobless allowance in the UK declined more than expected in June, the latest data from the Office for National Statistics showed. The claimant count for June was 1.48 million, down 21,200 from May. Economists expected the figure to fall by 8,000. The claimant count rate edged down to 4.4 percent in June from 4.5 percent in May.