Attempts to push a rally in U.S. crude-oil futures prices into a fifth day faltered Wednesday under the weight of rising inventories and worries over weak demand.
Data that showed U.S. crude oil supply relative to refiner demand climbed to a 21-year high followed a warning by the International Energy Agency, the West's oil-policy watchdog, that the market is facing weaker oil-demand growth and higher supplies.
"The subdued growth rate of oil demand now looks increasingly entrenched in the face of high oil prices and weak economic growth," the IEA said in its monthly global outlook.
That outlook followed a Tuesday report from the U.S. Energy Information Administration which sees only modest growth in oil-demand growth in the world's biggest oil consumer this year after 2012 consumption hit a 16-year low.
EIA's latest weekly oil-inventory data show U.S. refiners trimmed crude-oil processing rates to a two-year low of less than 14 million barrels a day last week, amid maintenance work and operating snags at some facilities. At that same time, rising domestic output and imports lifted stocks by 2.6 million barrels last week, slightly ahead of expectations.
The combination of lower demand and higher supply means current inventories now are sufficient to cover 27.4 days of refiner needs, the highest level since 1992, and compared with the five-year average of less than 24 days of cover.
The data snuffed out an early attempt to push a four-day, 2.3% rally in prices higher for a fifth day.
"The move to push crude up to $93.50 lost momentum," said Gene McGillian, broker and analyst at Tradition Energy. "The fundamentals aren't really particularly strong" enough to justify prices at those levels which were last hit in late February, he said.
Light, sweet crude oil for April delivery on the New York Mercantile Exchange settled 2 cents lower, at $92.52 a barrel, after trading in a range of $93.40 to $91.91 a barrel.
April ICE North Sea Brent crude settled $1.13 lower, at $108.52 a barrel, the lowest price since Dec. 17, 2012.
Traders said Brent came under pressure as the EIA data showed oil inventories at Cushing, Okla. fell by 1.5 million barrels last week, the biggest decline since May 2011. Analysts said the large drop at Cushing suggests that Gulf Coast refiners appear to be moving more crude oil out of the terminal hub that is the delivery point for the Nymex contract, most likely by rail, as pipeline outlets are constrained.
Crude exiting Cushing for the Gulf Coast refinery hub would increase competition with imports priced in relation to Brent, the international benchmark, and would put pressure on Brent prices, traders said. Supplies of North Sea crudes have been rising after operational snags were resolved in recent weeks and the IEA said a pipeline agreement between Sudan and South Sudan means more crude could be flowing from that area, increasing supplies by 200,000 barrels a day by year's end.
Despite a fall of nearly 3.6 million barrels in gasoline stockpiles last week, prices of reformulated gasoline blendstock futures were weaker for a third day. Analysts said the decline in inventories likely reflected movement of fuel during the transition from winter-grade to summer-grade fuel that are typical at this time year, rather than signalling stronger demand. The EIA said in its Short-Term Energy Outlook on Tuesday it sees gasoline stunted at a 2012 level over the next two years, as improvements in fuel-mileage standards cut consumption.
April-delivery reformulated gasoline futures were 0.79 cents lower, at $3.1423 a gallon. The contract fell 1.9% in the past three sessions.
April heating oil was 2.42 cents lower, at $2.9242 a gallon, and lost 1.9% over the past four sessions.
Copyright (c) 2012 Dow Jones & Company, Inc.
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