Oil Pressured by Bernanke Comments; Crude Stocks Up

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U.S. crude prices settled lower on Wednesday, after the Federal Reserve rendered a widely-expected decision on interest rates.

Brent crude futures were choppy all session as traders looked to see if it could overcome broad economic headwinds to extend its near 6 percent rise so far in June.

The front-month contract for August delivery eventually finished up 10 cents a barrel at $106.12, but prices turned lower in post-settlement trading, hitting a low of $105.55.

U.S. light, sweet crude hit a fresh nine-month high early on Wednesday of $99.02 a barrel and saw its discount to Brent narrow to less than $7 a barrel for the first time since November 2011. But by the day's settlement, prices had turned lower to finish 20 cents down at $98.24, and slipped below $98 after the close.

The two-day meeting of the U.S. central bank's Federal Open Market Committee (FOMC) finished with a statement saying the Fed would keep buying $85 billion in bonds per month.

But markets were spooked after Bernanke said in a subsequent news conference the Fed could reduce the rate of stimulus this year if the economy of the world's largest oil consumer continues to improve.

"Although the FOMC headlines failed to offer much of a surprise, the stock market's response to the Q and A session provided a bearish element to the energy complex," said Jim Ritterbusch, president of Chicago-based Ritterbusch & Associates.

The Fed bond buying program has largely supported commodities because it has lowered the value of the U.S. dollar, making goods priced in dollars cheaper for other currencies. The dollar rose after the FOMC meeting, while U.S. equity markets turned lower.

"Bernanke will try to hand-hold the market and manage expectations, but the outlook for easing will depend on data, so we'll have volatility for the rest of the summer," said Michael Hewson, a strategist at CMC Markets.

Middle East

Brent crude oil reached an 11-week high earlier this week, buoyed by fears of oil supply disruption if other Middle East nations are drawn into the civil war in Syria, where heavy fighting was reported on Tuesday in Aleppo, the country's biggest city.

Unless there is more evidence that other Middle Eastern nations could be drawn into the conflict, however, related oil price rallies may fade, Standard Bank analyst Marc Ground said.

The spread between global benchmark Brent crude and U.S. benchmark West Texas Intermediate narrowed to $6.99 per barrel during early morning trading, the narrowest since November 2011. It was last trading at $7.61.

Weekly data from the U.S. Energy Information Administration showed U.S. crude stocks rose by 313,000 barrels, against the market expectation for a 500,000 barrel decline.

The data contrasted with figures from the American Petroleum Institute on Tuesday that showed commercial crude oil stocks fell by around 4 million barrels last week.

The oil market was underpinned by a large gasoline stock fall in the densely populated U.S. East Coast, where the EIA data showed a 1.5 million barrel decline. U.S. gasoline futures finished up less than 1 percent near $2.89 a gallon.