Crude oil futures dip on profit-taking after Brent breaches $90/b

Crude oil futures fell in mid-morning trade in Asia Jan. 27 on profit-taking, after ICE Brent breached the $90/b mark overnight for the first time since October 2014 amid an ongoing rally in the oil markets.

A build in US crude inventories last week also weighed on oil prices.

At 10:27 am Singapore time (0227 GMT), the ICE March Brent futures contract was down 73 cents/b (0.81%) from the previous close to $89.23/b, while the NYMEX March light sweet crude contract fell 71 cents/b (0.81%) at $86.64/b.

The front-month ICE Brent crude contract overnight touched an intra-day high of $90.47/b, its highest since Oct. 10, 2014, though it later shed some gains to settle 2% higher on the day.

A keenly watched US Federal Reserve open market committee meeting overnight ended without event, with US Fed chair Jerome Powell signaling that the Fed stood ready to raise rates at its meeting in March as widely expected, while following thereafter with scaling back the size of its balance sheet.

"With his comments that 'the committee is of a mind to raise the federal funds rate at the March meeting,' a March rate lift-off has been clearly reaffirmed, which does come in line with market expectations," said IG market strategist Yeap Jun Rong.

ING analysts, in a Jan. 27 note led by chief international economist James Knightley, said: "Risk assets have not seen any new shock from the Fed, which is supportive. There is arguably a window of tranquility now for risk assets as we roll forward to the March meeting, which is quite some distance away."

A jump in the US dollar did little to dent the rise in oil prices. The US dollar index had closed the day 0.56% higher at 96.4860.

In the US, commercial crude stocks climbed 2.38 million barrels to 416.19 million barrels in the week ended Jan. 21, Energy Information Administration data showed Jan. 26, amid tepid refinery demand and weak exports.

Nationwide gasoline stocks climbed 1.3 million barrels to 247.92 million barrels over the same period, while distillate stocks fell 2.8 million barrels to 125.15 million barrels.

Analysts expect oil prices to remain supported on a lack of supply from OPEC producers and ongoing geopolitical tensions between Russia and Ukraine.

"Even if the energy sector is spared any direct sanctions [on Russia], economic ones could still impact crude oil supply. This comes amid tightening global supplies as producers struggle to meet robust demand," said ANZ Research analysts in a Jan. 27 note. "Saudi Aramco CEO Amin Nasser has warned that producers are investing too little. This has seen OPEC struggle to increase output despite the group raising quota levels in recent months."