Wed Nov 6, 2013 4:04pm EST
By Anna Louie Sussman
NEW YORK, Nov 6 (Reuters) – U.S. crude futures rose by more than $1 a barrel on Wednesday, rebounding from four-month lows on unexpectedly large falls in U.S. fuel supplies. The U.S. benchmark’s discount to European Brent crude narrowed by $2 to a low of just under $10 during the session. Brent reversed gains in late trading to finish lower, after finding support for most of the session on concerns about prolonged supply outages in Libya as the peak northern hemisphere winter heating season looms.
“We were up strong all day. really bought the market after the Department of Energy report, so probably some money got taken off the table,” said Stephen Schork, editor of the Schork Report in Villanova, Pennsylvania.
December Brent fell even as contracts for next year largely gained, dragging the market into a contango structure for the first time since June and suggesting that weeks of weakness in U.S. physical crude oil markets is spilling over into the European and global markets.
“It speaks to a market eyeing a well-supplied situation at the moment,” said John Kilduff, a partner at Again Capital LLC in New York. “It seems that refiners, particularly in Europe, are struggling and it looks to continue. That’s a very bearish signal.”
Data from the Energy Information Administration (EIA) showed U.S. gasoline stocks fell by 3.8 million barrels last week, compared with forecasts in a Reuters poll for a 300,000-barrel decline.
U.S. distillates stocks fell 4.9 million barrels last week, against forecasts for a 1.3-million-barrel draw, to 118 million barrels, the data showed. Brent crude lost 9 cents to settle at $105.24, after gaining more than $1 to hit a session high of $106.41. U.S. oil rose $1.43 to settle at $94.80, paring gains of over $2 that brought it to a session high of $95.40. In the previous session, it posted its lowest settlement price in five months.
Both benchmarks had plumbed four-month lows in recent trading sessions.
As Brent pared its gains towards the close of the session, its premium over U.S. crude narrowed to a session low of $9.97, nearly $2 below the previous day’s close of $11.96. The spread between the two benchmarks CL-LCO1=R settled at $10.44.
Crude oil inventories grew by 1.58 million barrels, slightly less than the forecast for 1.6 million, EIA data showed. The smaller-than-expected build tempered concerns about growing stockpiles, despite its being the seventh straight week of builds.
Analysts said the overall picture was still negative for oil, citing weak demand, particularly in Europe.
“I would attribute (the market’s rise) to a countermove after heavy losses in the previous day,” said Carsten Fritsch, an analyst at Commerzbank in Frankfurt.
Turmoil in Libya continued to worry oil investors. Protesters at the Mellitah terminal in western Libya are pressuring Italian co-owner Eni to halt gas exports to Italy, Eni Chief Executive Paolo Scaroni told Italian radio on Wednesday. The minority Amazigh group, or Berbers, have been inside the port for more than a week, demanding more political rights.
Strikes and armed protests have shut much of the OPEC member’s oil output for months.
Iran resumes negotiations in Geneva with six world powers on Thursday to try to end a stand-off over its nuclear program, which the West suspects may be aimed at developing nuclear weapons, despite Iran’s denials. (Additional reporting by Jonathan Leff in New York, Simon Falush in London, Manash Goswami in Singapore; Editing by Keiron Henderson, Jane Baird and Chris Reese