Nymex crude-oil futures fell Wednesday despite a bullish inventory report, as traders took profits after the big price jump in recent days.
Light, sweet crude for September delivery settled at $93.35 a barrel on the New York Mercantile Exchange, down 32 cents. Brent crude on the ICE futures exchange closed at $112.14 a barrel, up 14 cents.
Trading was choppy throughout the day, during which the U.S. Department of Energy released weekly oil-inventory data that pointed to deeper-than-expected withdrawals of crude and petroleum products. U.S. oil prices were higher for much of the day after the report was released before dropping in the last hour before the close.
Wednesday's retreat followed a three-day stretch during which oil prices jumped 7.5%. The moves in recent days prompted questions over whether the fundamentals justify a continued rally upward. In the end, the market concluded the data weren't strong enough to send oil prices higher yet.
Tariq Zahir, managing member for Tyche Capital Advisors, said the market had already priced in the U.S. inventory data after the American Petroleum Institute Tuesday released a similar report that showed that oil inventories dropped by a large amount.
"We'll need another bullish catalyst to continue to have oil go higher," Mr. Zahir said.
The DOE said U.S. crude inventories fell by 3.7 million barrels compared with an average projected drop of 500,000 barrels. The API, an industry group, said Tuesday crude inventories fell by 5.4 million barrels last week.
The U.S. Energy Department's report also said distillates fell by 700,000 barrels compared with a projected build of 500,000 barrels, while gasoline inventories fell by 1.8 million barrels compared with an expected decline of one million barrels.
The data helped propel heating-oil prices higher Wednesday, although gasoline closed below Tuesday's level.
The data release comes on the heels of a series of recent outages that have raised concerns about market tightness. They include a refinery fire at a Chevron Corp. plant in California and an Enbridge Inc. pipeline outage in the U.S. Midwest. Analysts also cited upcoming maintenance in the North Sea as a tightening factor.
These outages--combined with concerns about stability in the Middle East and optimism about further Federal Reserve moves--had helped send crude oil and gasoline to three-month highs.
But many analysts are skeptical of the recent oil-market rally. At least some of the increase is related to expectations of more central bank stimulus actions even though there is still no concrete sign the U.S. Federal Reserve and others will follow through.
"I don't see any particular reason for any sustained, continuing strength," said Tim Evans, an analyst at Citi Futures Perspective.
Analysts' latest miscalculation of U.S. oil inventories followed a similar underestimation last week. Analysts cited a number of factors for the miss, noting the level of U.S. oil imports is notoriously unpredictable and the projections are based on historical data.
"There are so many different moving parts in the oil market that all of them can't be assessed on a timely basis," said Matt Smith, an analyst with Summit Energy.
Front-month reformulated gasoline blendstock, or RBOB, settled at 2.9804 a gallon, down 1.09 cents. Front-month heating oil settled at $3.0159 a gallon, up 1.79 cents.
Copyright (c) 2012 Dow Jones & Company, Inc.
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