U.S. oil prices pared gains Wednesday after the U.S. government report a larger-than-expected drop in crude stocks for last week, but profit-taking after the data kept prices below the $50 a barrel level that oil bulls had been hoping for.
Gasoline stockpiles rose 2.04 million barrels last week, according to the Energy Information Administration (EIA), while analysts surveyed by Bloomberg had projected a decline. The U.S. crude stockpiles dropped by 4.2 million barrels last, according to the U.S. Energy Information Administration, while analysts forecasted a decrease of 2.5 million barrels earlier. Stockpiles have fallen in recent weeks from their highest level in more than 80 years, boosting expectations that the global glut of crude that has weighed on prices for nearly two years is now shrinking.
Futures of Brent and U.S. crude’s West Texas Intermediate (WTI) both fell briefly after the EIA data. WTI for July delivery rose 40 cent, or 0.9 percent, to $49.02 a barrel on the New York Mercantile Exchange, which this contract down from its highest price at $49.62 since Oct. 12. Total volume traded was 12 percent below the 100-day average. Brent, the global benchmark, its July settlement increased 64 cents, or 1.3 percent, to $49.25 a barrel on the London-based ICE Futures Europe exchange, which the contract was as high as $49.69. The global benchmark crude traded at a 25-cent premium to WTI.
Gasoline futures RBC1 fell nearly 1.5 percent to around $1.63 a barrel after the EIA reported that gasoline stockpiles rose by 2 million barrels last week, while analysts are expecting strong demand for gasoline this summer, especially after the Memorial Day holiday next week. On the other hand, the supply disruptions in Canada, Nigeria and Libya are also helping to support the upward price momentum.
“Demand just wasn’t there,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. Memorial Day is the traditional start to the busy summer-driving season. After that, “You should have consistent draws and if you don’t, we’re in big trouble,” Mr. Yawger said.
However, David Thompson, executive vice-president at commodities broker Powerhouse in Washington, noticed that the gasoline could become worse if futures for the motor fuel break below the $1.60 support. “The bears will be encouraged to increase their selling pressure.”