LONDON: Brent crude oil futures were up near $110 a barrel on Thursday as the market shrugged off a decision by the U.S. Federal Reserve to reduce its monetary stimulus programme, and remained focused on U.S. crude stock draws and production outages.
Brent crude was up 45 cents to $110.08 a barrel by 1439 GMT, after ending $1.19 higher on Wednesday. U.S. oil futures rose 50 cents to $98.30, after finishing 58 cents up. The January U.S. contract expires today.
Oil prices faced some headwinds early in the session after the dollar rallied hard on the Federal Reserve's decision to reduce its bond buying, but had pushed ahead by the time New York traders arrived at their desks.
"The 'tapering proclamation' yesterday gained a lot of attention but it also turned out to be a non-event oil price-wise," said Michael Poulsen, oil risk manager at Global Risk Management.
Traders have had plenty of time to prepare for the Fed's move as there has been a steady stream of positive economic data over the last few months.
"Those who want to sell on the back of less liquidity will be met by those who want to buy as this is an indication that the Fed now believes the growth outlook is improving and that is what really drives these cyclical commodities," said Ole Hansen, senior commodity strategist at Saxo Bank.
The only fly in the ointment was a rise in U.S. initial weekly jobless claims to the highest level in nearly nine months, but this failed to stem the oil rally.
FALLING INVENTORIES
Instead, the market remained focused on supply fundamentals, including Libyan production outages and unrest in South Sudan.
Libyan exports have fallen to 110,000 barrels per day (bpd) from more than 1 million bpd in July, and the country has had to step up fuel imports.
In South Sudan, about 200 oil workers have sought refuge at a United Nations base and are expected to be evacuated after five days of conflict. A senior offical said at least 16 people had been killed in clashes since late Wednesday.
The market has also been bouyed by Wednesday's U.S. oil inventories report. This showed stock draws for a third week in a row and a big, unexpected fall in distillates stocks.
Analysts at BNP Paribas said that the 2.9 million barrel draw in U.S. crude stocks had been driven by higher refinery demand, as plants are ramping up following the completion of seasonal maintenance.
Over the last three weeks, stocks have fallen by 18 million barrels. "Refinery operators are taking advantage of superior refining margins that are being driven by relatively cheap cost of inputs," the analysts said in a note.
With the Fed's announcement out of the way, and traders closing their books ahead of the Christmas holidays, oil prices were expected to remain range-bound for the rest of the year, barring surprises.
"It will take quite a bit of news to push these markets now - this was really the last event this year," said Hansen, who expects to see U.S. crude trading at around $95.50-$99 a barrel, and Brent around $106-$111 a barrel until year-end.
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