NEW YORK – Oil prices hit three-week lows on Wednesday on worries over rising U.S. crude stockpiles, although a larger-than-expected drawdown in gasoline and distillates tempered the market’s bearish sentiment.
U.S. crude oil inventories rose 8 million barrels last week, the government-run Energy Information Administration (EIA) reported. [EIA/S]
The build was more than double the 3.9 million barrels forecast by analysts in a Reuters poll and above the 7.1 million build reported by industry group American Petroleum Institute.[API/S]
Oil prices extended losses briefly on the EIA report, before coming off their lows on what traders said was a 1.5 million-barrel drop in gasoline stocks that was also reported by the EIA.
Distillate stockpiles, which include diesel, fell by 2.6 million barrels.
The Reuters poll had forecast a decline of just 900,000 barrels for gasoline and 1.3 million for distillates.
“The products draws is providing a bullish tilt to the market,” said Matt Smith, commodity research director for the New York-headquartered energy consultancy and database Clipperdata.
U.S. crude <CLc1> was down $1 at $45.29 a barrel by 11:56 a.m. EDT. It had tumbled as much as $1.43 earlier to a three-week low of $44.86.
Global oil benchmark Brent <LCOc1> slid 81 cents at $47.90, after hitting a three-week low at $47.50.
Some were skeptical of how much support gasoline could offer to crude.
“Gasoline is getting a minor rebound and the market may be impressed. But the bottom line is what’s happening in products is more of a function of better cash markets, not a change in fundamentals,” said Scott Shelton, energy broker and commodities specialist at ICAP.
Mercuria chief executive Marco Dunand said he saw the oil market returning to balance and even displaying a deficit in 2016, as non-OPEC producers limit supply to ward off more aggressive price declines.
But he only expected a modest pick-up in prices.
“Most people will agree that by end of next year, we’re going to start drawing (on stocks) and we will still do that in 2017, which over time will trigger a price rally, and I think there’s a chance that by the end of next year we might be more likely to be in a $55-type range, to $60 by 2017,” Dunand told the Reuters Commodities summit.
Torbjorn Tornqvist, chief executive at trading house Gunvor, said he did not expect the oil price to rise beyond normal volatility levels at least until mid-2016.
(Additional reporting by Amanda Cooper and Christopher Johnson in London and Keith Wallis in Singapore; Editing by Marguerita Choy and Chris Reese)
This article was written by Barani Krishnan from Reuters and was legally licensed through the NewsCred publisher network.