Investing.com - Oil prices rebounded strongly from the previous session's battering before settling mixed on Wednesday, as data showing unexpectedly high consumption of U.S. gasoline and diesel last week was offset by worries of more crude production coming.
Top oil exporter Saudi Arabia's promise to pump as much crude as necessary in coming weeks to ward off any supply tightness from U.S. sanctions on Iranian exports loomed large over the market, analysts said.
A global risk-off environment that hit world equity markets again on Wednesday could also limit future recovery in oil, other market participants said.
“We see the risk-off posture in equities spilling over into the energy markets eventually,” said Tariq Zahir, managing member at Tyche Capital Advisors, an oil-focused fund in New York.
U.S. WTI settled up 39 cents, or 0.6%, at $66.82 per barrel. It had risen as much $1.29, or nearly 2% earlier, to a session high of $67.72
U.K. Brent, the global benchmark for oil, settled down 56 cents, or 0.7%, at $76.16 after a session high at $77.56.
Both benchmarks slumped more than 4% on Tuesday, their most since July, after top oil exporter Saudi Arabia pledged to pump as much crude as necessary to ensure minimum supply disruptions to the market from U.S. sanctions on Iranian oil exports beginning Nov. 4.
The Saudi promise, announced by its Energy Minister Khalid al-Falih, essentially abandons the kingdom’s commitment to OPEC’s production-cutting policy that helped oil prices recover from the oil glut of the past three years that erased nearly 75% of the market’s value.
While Falih’s words still hung over Wednesday’s market, traders’ attention was drawn briefly toward weekly U.S. supply-demand data on oil.
The U.S. Energy Information Administration (EIA) reported that crude inventories in the country rose by 6.35 million barrels in the week to Oct. 19, almost double analysts’ forecasts for a build of 3.69 million. It was the latest in five-straight weeks of builds that have added about 25 million barrels more of crude to U.S. stockpiles than expected by the market.
While the headline number reported by the EIA itself was bearish, traders took more note of gasoline inventories, which fell by 4.83 million barrels, compared to expectations for a draw of 1.88 million barrels. Distillate stockpiles, which represent diesel and heating oil, meanwhile, decreased by 2.26 million barrels, compared with forecasts for a drop of 1.93 million.
“A solid draw to gasoline and distillate inventories have offset the bearish influence of a fifth-consecutive build to crude stocks,” said Matthew Smith, analyst at Clipper Data, a New York-based tracker of crude cargoes.
Higher drawdown in oil products are common at this time of year when U.S. refiners do seasonal maintenance work on their plants. The EIA reported that refinery runs for last week were still at under 90% of capacity.
Some noted that WTI’s contango structure, where front-month December traded at a discount of about 20 cents to January, would encourage more stockpiling of crude as merchants tried to store oil instead of delivering it sooner to capitalize on a higher return later.
“This will encourage builds in the weeks to come especially since we always see weaker demand in the fourth quarter,” Tyche Capital’s Zahir said.