Crude Settles at One-Month High After Modest Inventory Rise

Crude-oil futures settled at a one-month high Wednesday after a report showed U.S. oil stockpiles rose less than expected last week.

Oil inventories increased 200,000 barrels to 395.5 million barrels, the Energy Information Administration said. The rise pushed oil inventories to their highest level since the EIA began keeping weekly records in August 1982, though the gain was less than anticipated by experts and offset by a steep rise in fuel demand.

Light, sweet crude for June delivery settled $1, or 1.1%, higher at $96.62 a barrel on the New York Mercantile Exchange. That is the highest front-month settlement since April 2.

Brent crude on ICE Futures Europe settled 6 cents, or 0.1%, lower at $104.34 a barrel.

"The market got a bit excited that the inventories for crude came in below expectations," said Dominick Chirichella, analyst at the Energy Management Institute in New York. "I think it's a lot to do about nothing...we're still building and inventories and are still at record-high levels of crude oil."

Analysts surveyed by Dow Jones Newswires were calling for an inventory rise of 1.7 million barrels.

U.S. oil stockpiles have been rising steadily since the beginning of the year, fueled largely by a steady rise in domestic production. U.S. stockpiles are up roughly 10% year to date.

Market participants said they were surprised by last week's sharp pickup in demand, according to the EIA. The agency's metric for refined fuel use rose 6.5% to 19.1 million barrels a day, although demand for gasoline--the biggest component--was essentially flat.

"Without a doubt the demand number was a little more positive than we've been accustomed to seeing...but guys who are bearish on this market are bearish because of supply," said Pete Donovan, vice president at Vantage Trading, an oil options brokerage, in New York.

Oil futures have been buffeted in recent weeks by persistent signs of weak demand globally and improving global supply, but worries about the escalating civil war in Syria have kept traders on guard for supply disruptions in the Middle East. On Tuesday, unconfirmed reports of explosions in Tehran triggered a 30-cent intraday jump in the price of crude.

On Tuesday, the EIA said Saudi Arabia, the world's biggest oil producer, boosted production 1.8% last month to 9.2 million barrels a day, the highest level since December. The data also showed overall output from members of the Organization of the Petroleum Exporting Countries rose to a five-month high.

Gasoline stockpiles last week fell 900,000 barrels, according to the EIA. Distillate stocks, including heating oil and diesel, rose 1.8 million barrels. Refinery utilization rose 2.6 percentage points to 87% of capacity.

Analysts had expected gasoline stockpiles to fall 300,000 barrels, while stocks of distillates were seen rising by 400,000 barrels. Refiners were expected to increase operations by 0.4 percentage point to 84.8% of capacity.

Oil inventories at the key trading hub of Cushing, Okla., fell 700,000 barrels last week to 49.1 million barrels. A recent decline in Cushing stockpiles has helped to narrow the discount of Nymex crude versus global benchmarks like Brent crude.

The Nymex crude's discount to Brent crude recently neared $7.72 a barrel, its lowest level since January 2011.

Front-month June reformulated gasoline blendstock, or RBOB, settled 2.04 cents, or 0.7%, higher at $2.8538 a gallon. June heating oil settled 1.30 cents, or 0.4%, lower at $2.9147 a gallon.


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