Oil rises on Fed minutes, U.S. inventory drop
By Robert Gibbons
NEW YORK (Reuters) - Oil prices rose on Wednesday as indications the Federal Reserve is likely to provide more stimulus and a sharp drop in U.S. crude inventories countered concerns about Europe's debt crisis.
Brent and U.S. oil futures turned higher after minutes from the most recent Federal Reserve policy meeting indicated the U.S. central bank is likely to deliver another round of monetary stimulus "fairly soon" unless the economy improves considerably.
"The implication is that it will require more units of a degraded asset (U.S. dollar) to purchase hard assets like oil," said Michael Fitzpatrick, editor in chief at industry newsletter Energy Overview in New York.
Dollar-denominated commodities can receive a boost from a weak U.S. currency, and the dollar suffered losses after the Federal Reserve news. <USD/>
U.S. crude oil inventories fell 5.41 million barrels last week, according to a weekly report from the Energy Information Administration (EIA), much more than the anticipated drop of 400,000 barrels and providing a boost to crude futures. <EIA/S>
The EIA report was in line with the 6.0-million-barrel inventory slide reported by industry group the American Petroleum Institute on Tuesday. <API/S>
The center of Tropical Storm Isaac was approaching the Caribbean and expected to become a hurricane, lending support to oil futures because it could threaten U.S. energy production in the Gulf of Mexico.
Oil gains were limited by investor caution as Greek Prime Minister Antonis Samaras began a series of bilateral talks with the leaders of France, Germany and the euro zone this week, as Greece seeks more time to implement reforms required to continue getting help paying debt. Continued...