Distillate inventories increased by 6.1 million barrels last week to 128.9 million barrels, while expectations were for an increase of 600,000 barrels. Crude oil inventories fell by 959,000 barrels last week to 414.6 million barrels, while analysts expected a decrease of 184,000 barrels.
In the past few weeks, gasoline and diesel inventories have increased sharply, dragging down the oil market. Andrew Lipow, president of Lipow Oil Associates, said that fuel inventories have increased as refineries continue to increase production.
At the same time, the strong dollar rose again, forming a resonance blow to oil prices. The short-term fundamentals are bearish, but it is worth noting that before the non-agricultural data is released, there are still variables. There are fewer economic data on this trading day, and the focus is on the impact of Friday's non-agricultural data on oil prices.
Federal Reserve officials agreed that inflation could continue to slow this year, but they also saw rising risks that price pressures could remain stagnant as policymakers begin to weigh the expected policy impact of the incoming Trump administration, according to minutes from the Fed's December meeting released on Wednesday.
Participants expected inflation to continue to move toward 2%, but they noted that recent higher-than-expected inflation readings and the impact of potential changes in trade and immigration policies suggest that the process may take longer than previously expected,
The minutes read about the discussion surrounding the Fed's decision last month to cut its benchmark policy rate by 25 basis points. Some believed that the decline in inflation may be temporarily stalled or pointed to the risk of a possible stall.
The minutes described the policy-setting Federal Open Market Committee’s December rate cut as a carefully weighed decision, with some participants noting that there was merit in not cutting borrowing costs given what some saw as stalled progress in reducing inflation.
Given the uncertainty ahead and the fact that the benchmark rate has already been cut by a full percentage point through 2024, participants said the committee was at or close to a point where it felt it was appropriate to slow the pace of easing, the minutes said, with most participants saying … the committee could take a cautious approach to considering further rate cuts.
After the minutes were released, interest rate futures markets continued to reflect bets that the Fed would hold its policy rate steady in its current 4.25%-4.50% range over the next few meetings, with the first rate cut through 2025 coming as early as May, and only a 50% chance of a second rate cut.
The minutes show that policymakers are facing a series of sudden new influences in the current economic situation. At the beginning of this year, unemployment was relatively low, economic growth was strong, and inflation was still above the Fed's 2% target but expected to decline.
Fed staff stressed that it is very difficult to predict the impact of the incoming administration on the future economy, but they said that policies may lead to slower growth and higher unemployment.
The incoming administration has promised to deport undocumented immigrants, tighten borders and increase taxes on imported goods. Referring to the staff's assessment of the policies that President-elect Trump may introduce after January 20, the minutes wrote,
After taking into account recent data and preliminary assumptions about potential policy changes, real gross domestic product (GDP) growth is expected to be slightly lower and unemployment will be slightly higher than the previous baseline forecast.
The minutes showed an overall hawkish bias, which is not conducive to the upward expectation of the Fed's interest rate cut in 2025, putting pressure on oil prices.
Four people familiar with the matter said Trump is considering declaring a national economic emergency to provide a legal basis for imposing a large number of general tariffs.
The declaration would allow Trump to use the International Economic Emergency Powers Act (IEEPA) to enact a new tariff plan, which unilaterally authorizes the president to manage imports during a national emergency.
One of the sources noted that Trump likes the law because it gives broad jurisdiction over how to implement tariffs without strict requirements to prove that the tariffs are for national security reasons.