By David Gaffen
NEW YORK (Reuters) – Oil prices rebounded from early losses on Wednesday after U.S. government data showed a larger-than-expected falloff in crude inventories, which encouraged buying after several days of selling on worries that a global crude glut was persisting despite output cuts by producing countries.
U.S. crude prices stayed higher, while Brent edged back into negative territory but off session lows. U.S. West Texas Intermediate (WTI) settled up six cents at $49.62 per barrel, while Brent crude, the international benchmark, ended down 21 cents at $51.82 a barrel.
The U.S. Energy Department said crude stocks dropped 3.6 million barrels last week, more than double what was expected. [EIA/S] The government data was a surprise the day after industry group the American Petroleum Institute said its data showed a build.
Buying lifted U.S. crude futures just slightly after declines in six of the last seven days. Analysts noted that the EIA report also showed gasoline and distillate stockpiles grew, while U.S. production and imports increased.
“We’re running a slight deficit and starting to eat into inventories but not by any meaningful amount,” said Tanya Andrien, vice president in strategic development at Drillinginfo.
Refining capacity utilization rose to 94.1 percent, highest since November 2015. That boosted gasoline inventories to 241 million barrels, about where they were a year ago, which sapped refining margins all throughout last year. Overall, refiners processed 17.3 million barrels of crude a day in the most recent week. That’s a record, according to EIA.
Reformulated blendstock gasoline prices dropped 2.4 percent to $1.5840 a gallon after gasoline inventories rose sharply.
Analysts warned that weak U.S. gasoline demand could weigh on crude prices in coming weeks unless demand spikes with summer driving season.
Brent and WTI prices got a boost in early trade when Saudi Energy Minister Khalid al-Falih said he was interested in talks between the Organization of the Petroleum Exporting Countries and non-OPEC producers to stabilize prices.
OPEC and other producing countries including Russia pledged to cut output by 1.8 million barrels per day (bpd) in the first half of 2017. OPEC meets in May to discuss extending cuts.
The average value of the Brent crude forward curve <0#LCO:> has fallen by over $5 per barrel since the start of the year, suggesting doubts in the market about whether the glut will be reduced.
“We see week-to-week changes in EIA stocks reports but the bottom line is we have more crude than we did last year, and are well ahead of what we had for the five-year averages – we’re not running out of crude oil anytime soon,” said Darin Newsom, DTN senior analyst in Omaha, Nebraska.
(Additional reporting by Sabrina Zawadzki in London and Henning Gloystein in Singapore; Editing by David Gregorio and Chizu Nomiyama)