Oil jumps to 2016 highs as dollar drops on Fed decision

Wed Apr 27, 2016 7:46pm EDT
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By Barani Krishnan

NEW YORK (Reuters) - Oil prices jumped about 3 percent on Wednesday, hitting new highs for 2016 as the dollar weakened after the Federal Reserve announced it would leave U.S. interest rates unchanged.

Oil had risen early, the day after an industry group said U.S. crude inventories had dropped in the latest week. But prices retreated after the U.S. Energy Information Administration reported in the morning that crude stocks climbed 2 million barrels last week to an all-time peak of 540.6 million barrels.

A Reuters poll of analysts had forecast a build of 2.4-million barrels.

In early afternoon, the Fed announced it was leaving interest rates unchanged, and issued a statement implying it was in no hurry to raise rates. Futures of Brent and U.S. crude's West Texas Intermediate (WTI) surged minutes before settlement, hitting new peaks for the year as the dollar sank to session lows.

"Bullish momentum from a technical perspective, in cahoots with dovish Fed rhetoric, has this market on fire again despite the crude inventories we're seeing," said Matt Smith, director of commodities research at New York-headquartered Clipperdata.

Front-month Brent finished up $1.44, at $47.18, having hit a 2016 high of $47.45 earlier.

WTI's front-month contract settled up $1.29, percent, at $45.33 a barrel, after hitting a 2016 high at $45.62.

Declines in the dollar make oil and other commodities denominated in the greenback more affordable to holders of other currencies.   Continued...

An oil pump jack can be seen in Cisco, Texas, August 23, 2015.  REUTERS/Mike Stone