NEW YORK: Oil prices ended less than 1 percent lower on Wednesday after data showed a build in US crude inventories, reinforcing the view that oil prices are range bound, buoyed by expected OPEC production cuts while pressured by US output growth.
US crude futures for March delivery CLc1 settled at $52.75 a barrel, down 43 cents, after earlier dropping to as low as $52.56 per barrel.
Benchmark Brent crude LCOc1 settled down 36 cents a barrel at $55.08.
“Crude oil is in the middle of a trading range that began to unfold in early December,” said Walter Zimmerman, chief technical analyst at ICAP. “You have a market with a serious case of indigestion; it swallowed too much speculative length.”
Market expectations of output cuts by the Organization of the Petroleum Exporting Countries have provided a floor for prices, while extreme speculative length and looming US production growth provide a ceiling, he said.
The US government’s Energy Information Administration (EIA) reported that crude; gasoline and diesel stockpiles rose, confirming a report from the American Petroleum Institute trade group late on Tuesday.
The EIA data, however, showed a substantial build in gasoline stockpiles of 6.8 million barrels, exceeding analyst expectations and figures in the API report.
US gasoline cracks spread, or refining margins RBc1-CLc1, hit a session low of $12.20 a barrel after the data was released, the lowest since Dec. 14.
Oil prices have found support in recent weeks from plans by OPEC and other producers to cut output. Around 1.5 million barrels per day (bpd) has already been cut from the market out of the 1.8 million bpd agreed by major producers starting on Jan. 1, energy ministers said on Sunday.
Bernstein Energy said global oil inventories declined by 24 million barrels to 5.7 billion barrels in the fourth quarter of 2016 from the previous quarter. The amount remaining equates to about 60 days of world oil consumption.
Meanwhile, US oil production has risen more than 6 percent since mid-2016, yet it remains 7 percent below its 2015 peak. The output is back to levels reached in late 2014 when strong US production contributed to a crash in crude prices.
President Donald Trump’s promise to support the US oil industry has encouraged analysts to revise up their forecasts of growth in domestic oil production, which is already benefiting from higher prices.
A push by Republicans in the US House of Representatives for a shift to a border-adjusted corporate tax could help propel US crude prices higher than global benchmark Brent, triggering large-scale domestic production, Goldman Sachs said.