* U.S. crude stocks drop 2.9 mln bbls, distillates also fall
* U.S. Fed announces tapering of stimulus program
By Anna Louie Sussman
NEW YORK, Dec 18 Brent crude oil futures on
Wednesday shrugged off the U.S. Federal Reserve's decision to
begin tapering its stimulus program, maintaining gains that
widened its premium to U.S. crude.
Both Brent and U.S. crude oil pared gains immediately after
the 2 p.m. EST (1900 GMT) announcement, then bounced back
several minutes later.
The U.S. Federal Reserve announced plans to trim its
aggressive bond-buying program on Wednesday but sought to temper
the long-awaited move by suggesting its key interest rate would
stay lower for even longer than previously promised.
The central bank said it would reduce its monthly asset
purchases by $10 billion to total $75 billion. It trimmed
equally from mortgage and Treasury bonds.
"The Fed is indicating that their data is showing a strong
enough economy that they're pulling back (monetary stimulus),"
said John Kilduff, a partner with Again Capital LLC in New York.
"That's bullish for crude oil and refined product."
Strong demand for Brent from Mediterranean refiners in the
absence of Libyan supply also boosted the international
benchmark. Mediterranean refiners have more than doubled
purchases of North Sea crude grades since November, an unusual
move that is expected to extend into 2014 with British and
Norwegian oil as the go-to substitute for absent Libyan barrels.
U.S. crude gained scant support from data from the U.S.
Energy Information Administration (EIA) showing crude
inventories in the world's largest oil consumer dropped 2.9
million barrels to 372.3 million barrels, compared with
forecasts of a 2.3 million barrel draw. The higher-than-expected
draw was countered by data showing refinery runs fell 1.1
percent from the previous week.
Brent crude rose $1.19 to settle at $109.63, after
settling nearly $1 lower on Tuesday.
U.S. oil rose 58 cents to close at $97.80, after
earlier rising 79 cents to a high of $98.01 on strong housing
data from the U.S.
U.S. RBOB gasoline futures gained 5.01 cents to close
LIBYA RISK; PIPELINE TO START IN JANUARY
The spread between the two benchmarks settled at
$11.83, nearly $1 wider than Tuesday's close.
Geopolitical risk in Libya, where on Sunday an autonomy
movement in the east said it would not end a blockade of several
oil-exporting ports, supported Brent.
U.S. crude also gained support from rising equity prices,
but the filling of the 700,000 barrel-per-day TransCanada Corp
pipeline from the Cushing, Oklahoma storage hub to the
Gulf Coast kept gains in check.
TransCanada expects its new pipeline to begin service on
Jan. 22, its chief executive said in an interview on Tuesday.
The company is currently filling the Cushing to Port Arthur,
Texas, pipeline with the 3 million barrels of crude oil needed
before it can be placed into normal operation.
"Libyan rebels still haven't turned over some territory in
the oil-producing region, so you're getting some geopolitical
support for Brent, coupled with the fact that we'll soon be
getting a few hundred thousand barrels a day down to Port
Arthur," said Stephen Schork, editor of the Schork Report in
U.S. equities also rose after briefly plunging on Wednesday
after the Fed's announcement.