MW: Oil falls after surprise rise in U.S. inventories
By Michael Kitchen, MarketWatch
LOS ANGELES (MarketWatch) — A surprise surge in U.S. oil inventories sent crude futures lower in electronic trade Wednesday, though the price drop was relatively modest as the market awaited confirmation from government data due later in the day.
Benchmark U.S. crude oil for January delivery CLF4 -0.21% retreated 23 cents, or 0.3%, to $93.45 a barrel, extending a 0.4% loss in Tuesday’s floor trade on the New York Mercantile Exchange.
Following the Nymex close, the American Petroleum Institute reported U.S. crude stocks rose by 6.9 million barrels in the week ended Nov. 22, according to data from sources, confounding expectations for a drop of 1.5 million barrels, according to a Platts survey of analysts.
Price Futures Group senior market analyst Phil Flynn called the API data a “bearish surprise on oil” that “should shake out some bulls” ahead of the Thanksgiving Day holiday on Thursday, and January Nymex crude quickly fell to $93.47 after the report’s release.
However, Citi Futures energy analyst Timothy Evans said that the results would still need to be confirmed by the U.S. Energy Information Administration’s own weekly data — often regarded as more definitive — which was due out later Wednesday at 10:30 a.m. U.S. Eastern time.
“We would not assume that the [EIA data] fully confirms this particular report. The API has established a solid track record when it comes to crude-oil inventories at Cushing, Okla., but the nationwide data still often differs,” Evans wrote, referring to the Cushing delivery hub for Nymex futures.
If, however, the EIA’s numbers do conform with the API’s account of a significant build-up in inventories, “we’d expect to see a further downside price test, perhaps even if the rest of the market moves higher,” Evans wrote.
While Nymex futures fell, January Brent crude UK:LCOF4 +0.05% ticked 11 cents, or 0.1%, higher in Wednesday trade to $110.99 a barrel, almost entirely erasing its 12-cent loss on Tuesday.
“With the reaction to the six-month Iranian nuclear deal fading, the [Organization of the Petroleum Exporting Countries] summit on Dec. 4 becomes the next key event on the global market agenda, with a large majority of those surveyed expecting a quota rollover,” said Evans.
He said that with Brent holding above $110, OPEC would likely chose a “quieter approach” than cutting production in an attempt to juice prices.
In other energy-futures trading Wednesday, December gasoline RBZ3 +0.31% tacked on a penny for a 0.3% gain to $2.70 a gallon after the API reportedly said stockpiles rose just 201,000 barrels against a forecast increase of 1 million barrels tipped in the Platts survey.
January natural gas NGF14 -0.21% traded fractionally lower, holding at $3.86 per million British thermal units after a 2-cent advance on Tuesday, when the December contract expired.
Michael Kitchen is Asia editor for MarketWatch and is based in Los Angeles. You can follow him on Twitter at @KitchenNews.
