Investing.com - Despite data showing a disappointing U.S. crude inventory draw, oil prices jumped 2% on Wednesday, recouping about a third of the previous day's losses after the Federal Reserve indicated there could be fewer rate hikes next year.
U.S. West Texas Intermediate crude settled up 96 cents, or 2.1%, at $47.20 per barrel. It had fallen 7% on Tuesday and plumbed an August 2017 low of $46.12.
U.K. Brent, the global oil benchmark, was up 30 cents, or 0.5%, at $56.56 per barrel by 3:10 PM ET (20:10 GMT). It sunk 6% in the previous session, to an Oct 2017 low of $56.87.
The Fed raised U.S. interest rates by a quarter point for the fourth time this year. But the central bank also indicated it would take into account "a wide range of information" in deciding further rate hikes and its dot plot indicated expectations from the FOMC of two rate hikes in 2019, down from three.
Despite seemingly positive to risk assets, the Fed drove equity prices on Wall Street down, with the Dow, S&P 500 and Nasdaq all registering losses after the rate hike announcement and accompanying statement from the central bank. Fed Chairman Jay Powell's press conference, which many took to be hawkish, especially with respect to the Fed's balance sheet, added more selling pressure on stocks.
Oil prices, nevertheless, rose, partly due to those buying back to cover the short positions that contributed to Tuesday's plunge, and on speculation of what the Fed decision could yield in coming months, traders said.
"We were oversold yesterday, so it's not surprising to have a bounce back today," said Tariq Zahir, managing member at Tyche Capital Advisors, an oil-focused fund in New York. "But given how the the equity indices are performing, I'd say this is a one-off thing and oil is going to sell off again in the coming days."
Some analysts think that WTI may break its key $40 support before the end of 2018, citing the thinner trading volumes typical for the holiday season and the heavier reliance at this time of the year on algorithmic trading models that tend to focus on price action, ignoring fundamentals.
Despite Wednesday's rebound, WTI remains down 39% from the four-year highs of nearly $77 struck in October. For the year, it is off by 22%.
Brent is 35% lower than the 2014 high of almost $87 struck two months back. For the year, it is down by 15%.
Earlier in the day, the Energy Information Administration said U.S. crude stockpiles fell by 497,000 barrels for the week ended Dec. 14 versus a forecast drop of 2.44 million.
Gasoline inventories rose by 1.77 million barrels, compared to expectations for a build of 1.2 million barrels, the EIA added. The only positive number in its weekly data release was for distillates, which the agency said saw a decrease of 4.24 million barrels versus an expected gain of 0.57 million.