OIL FUTURES: Crude settles higher on large US inventory draw, hawkish Fed pivot

A late-session rally pushed crude futures to settle higher Dec. 15 amid a bullish US inventory report and a hawkish pivot in US monetary policy.

NYMEX January WTI settled up 14 cents at $70.87/b and ICE February Brent rallied 18 cents to settle at $73.88/b.

Total US commercial crude stocks drew 4.58 million barrels lower in the week to Dec. 10 to 428.29 million barrels, Energy Information Administration data showed Dec. 15. The draw put US inventories at an eight-week low and left them 7.5% behind the five-year average for this time of year.

The draw exceeded market expectations. The American Petroleum Institute's weekly report Dec. 14 said crude stock fell 815,000 barrels in the week to Dec. 10, while analysts surveyed by S&P Global Platts on Dec. 13 had pointed to a 1.7 million barrel decline over the period.

Total product supplied for all refined products, EIA's proxy for demand, averaged 23.19 million b/d, up 3.35 million b/d from the week prior and an all-time high in records dating back to 1990.

NYMEX January RBOB settled 1.67 cents higher at $2.1275/gal and January ULSD climbed 20 points to settle at $2.2204/gal.

The EIA report pulled crude off overnight lows, but prices later turned positive after the US Federal Reserve signaled it would take a more hawkish stance on its monetary policy.

In its final meeting of the year, the Fed held its target interest rate steady at zero but announced it would accelerate the tapering of its bond purchase program by $30 billion next month. The Fed also signaled it would increase interest rates three times next year, although it confirmed it would not raise rates until it had completely wound down its bond purchases. Market watchers largely expected the move, although oil traced and equities rallied on the heels of the announcement.

"Crude prices turned positive after the Fed confirmed their hawkish turn and signaled they are positioning themselves to tackle inflation in the second quarter," OANDA senior market analyst Ed Moya said in a note. "The Fed is hoping to only deliver a few rate hikes next year and that should still allow the economy to grow by 4% next year."