Gasoline Inventory Drain Buoys Oil Despite Rising Crude Supply

Gasoline Inventory Drain Buoys Oil Despite Rising Crude Supply
Futures were little changed after falling and rising as much as 1% in New York.

(Bloomberg) -- Oil swung between gains and losses as crude and gasoline inventories moved in opposite directions.

Futures were little changed after falling and rising as much as 1 percent in New York. A government report showed nationwide crude stockpiles rose for the third week to 5.02 million barrels. Inventories at Cushing, Oklahoma, the delivery point for U.S. futures, rose for the first time in 12 weeks, while gasoline stockpiles sank the most since September.

“I don’t think the market can make up its mind whether it’s a bullish or bearish report,” Phil Flynn, senior market analyst at Price Futures Group, said by phone. Though the crude build initially weighed on the market, it was offset by a massive draw in refined products. "It’s actually kind of supportive in my mind,” he said.

Crude has struggled since hitting a three-year high in January. A broader market slump initially drove prices lower, while surging American production and increasing inventories remain a challenge. The Organization of Petroleum Exporting Countries acknowledged the scale of the shale boom, forecasting for the first time that supply growth from rivals will outstrip the increase in demand this year.

West Texas Intermediate for April delivery traded at $60.65 a barrel on the New York Mercantile Exchange, down 6 cents, at 12:32 p.m. in New York. The discount of April contracts to May slipped to 6 cents as growing supply weighed on the value of oil for prompt delivery.

Brent for May settlement fell 15 cents to $64.49 a barrel on the London-based ICE Futures Europe exchange, and traded at a $3.80 premium to WTI for the same month.

Rising U.S. production continues to stoke market fears. U.S. output climbed by 12,000 barrels to 10.381 million barrels a day last week, the highest in weekly data going back to 1983, according to the Energy Information Administration. Production is expected to top 11 million barrels a day in late 2018.

Still, last week’s massive products draw buoyed prices Wednesday. Gasoline stocks fell 6.27 million barrels to 244.8 barrels, the EIA report showed. Distillate inventories fell by 4.36 million barrels to the lowest level since December. April gasoline rose 1.1 percent to $1.9068 a gallon.

Oil-market news:

Iraq is talking with the Kurds and Turkey about restarting crude shipments from fields in the Kirkuk area of northern Iraq, Oil Minister Jabbar al-Luaibi told reporters in Basra. Iraq’s oil output is currently at 4.37 million barrels a day and production capacity is 4.7 million. Traders of crude oil cargoes face a dilemma. Is the global market just showing a typical seasonal lull, or warning of something more ominous? Wall Street analysts like Goldman Sachs Group Inc. and JPMorgan Chase & Co. remain convinced prices will strengthen again, but some key data suggest the problem could run deeper. China’s factory output and investment growth unexpectedly accelerated in the first two months of the year amid robust global demand. Restraint shown by U.S. producers supports Goldman Sachs Group Inc’s bullish oil view, the bank said in a report. It expects strong oil demand growth and high OPEC compliance to push inventories further below the five-year average in the third quarter.

With assistance from Tsuyoshi Inajima, Heesu Lee and Grant Smith. To contact the reporter on this story: Milana Vinn in New York at To contact the editors responsible for this story: James Herron at Catherine Traywick, David Marino.


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