Investing.com - U.S. crude oil inventories fell last week, breaking a stretch of three consecutive builds, but less-than-expected declines in gasoline and distillate stockpiles took the wind out of earlier gains.
The Energy Information Administration said in its regular weekly report that crude oil inventories declined by 1.4 million barrels in the week to April 12.
That was compared to forecasts for a stockpile draw of 1.2 million barrels, after a gain of 7.03 million barrels in the previous week.
“A 1.4 million-barrel crude draw isn’t anywhere spectacular in the grand scheme of things, especially if you consider the previous week’s 7-million-plus build, but it (removes some of the) uncertainty that has dogged the market in recent weeks as we got one build after another,” Investing.com senior commodity analyst Barani Krishnan commented after the release.
Supporting expectations for future draws, Krishnan noted that refinery runs, while having picked up to 87.7%, were still below the 90%-plus figure common for this time of year.
“That should keep a smooth (outflow of inventories) as gasoline-making ramps up ahead of the summer,” he said.
The EIA report also showed that gasoline inventories declined by 1.17 million barrels, compared to expectations for a draw of 2.13 million barrels, although distillate stockpiles dropped by just 0.36 million barrels, compared to forecasts for a decline of 0.85 million.
The lower-than-expected declines, which point to easing crude demand, appeared to hold sway over markets as U.S. crude prices turned negative following the release, last down 6 cents at $63.99 a barrel by 11:08 AM ET (15:08 GMT), compared to $64.18 prior to the publication.
London-traded Brent crude futures were unchanged at $71.72 a barrel, compared to $71.78 ahead of the report.
Prior to the publication, crude prices had supported by positive economic data out of China. Beijing reported 6.4% growth for the first quarter, beating expectations for a slowdown to 6.3%. Other data released overnight also showed larger-than-forecast increases in industrial production and retail sales for March.
The positive data from the world’s largest oil importer eased concerns over the negative impact on demand from an economic slowdown.
Despite the positive data, worries over the future of OPEC-led production cuts have limited gains this week. According to TASS news agency, Russia’s finance minister suggested on Monday that oil producers may wish to increase output when the agreement ends in June in order to recapture market share from the U.S. that has been producing at record highs.
Alexander Novak, Russia’s energy minister, said on Wednesday that it was too early to discuss possible options with regard to its agreement with OPEC, according to Bloomberg. Novak emphasized that a decision would be made at the summit in June.
Krishnan recently warned of the threat of U.S. production to the OPEC-led attempts to rebalance markets as drilled-but-uncompleted wells could be a “ticking time bomb”.
“As startling as the bust-to-boom saga in oil has been since December, equally riveting are the dark clouds forming over the market as pessimists point to the ever-capable threat of shale crude returning with enough force to offset the impact of supply cuts by the Saudis and Russians,” he said.