NEW YORK (Reuters) - Oil prices settled steady on Wednesday, erasing most of the day’s gains, after U.S. government data showed crude inventories at all-time peaks again despite strong refinery runs.
Crude stockpiles in the United States USOILC=ECI rose 2.3 million barrels last week, reaching a seventh straight week of record highs at 534.8 million barrels, the Energy Information Administration (EIA) reported.
The build was a million barrels less than forecast by a Reuters poll. Still, some analysts worried that stockpiles rose even with refinery utilization USOIRU=ECI at the highest seasonal rate since 2005. [EIA/S]
“The data poses a bit of a conundrum, in that crude stocks still increased so much despite strong refining runs and an apparent drop in imports,” said Matt Smith, director of commodity research at ClipperData.
U.S. crude futures' front-month contract CLc1 settled up 4 cents at $38.32 a barrel. It rose almost $1.60, or 3 percent, earlier, tracking a 3-month high in Wall Street shares .SPX and near 2-week low in the dollar .DXY. [.N] [FRX/] Brent crude's front-month LCOc1 settled up 12 cents at $39.26, retreating from a session peak of $40.61.
A monthly Reuters survey showed the Organization of the Petroleum Exporting Countries likely put out 100,000 barrels per day more in March, with Iran boosting supply after the lifting of export sanctions, while near-record shipments from southern Iraq offset maintenance and outages among smaller producers.
Oil prices have risen about 50 percent since mid-February after major producers within and outside OPEC floated the idea of freezing production at January’s highs. Some analysts say the rally has breached fundamentals and crude should trade lower.
Barclays in a report described macroeconomic concerns and high inventories as the oil market’s “ball and chain” that could keep prices in the mid-$30s to lower-$40 levels through the second quarter.
On Tuesday, Saudi Arabia and Kuwait, two of OPEC’s biggest exporters, said they would resume production at the jointly operated 300,000-barrels-per-day Khafji field even with a meeting on the production freeze set for April 17. Brent and U.S. crude fell about 3 percent in that session, reacting to the news.
“The fact that the announcement comes so shortly before the meeting in Doha is a disastrous sign,” said Commerzbank oil analyst Carsten Fritsch. “After all, it gives the impression that the lip service paid to freezing oil production is nothing but hot air.”
Additional reporting by Dmitry Zhdannikov in LONDON; Editing by Nick Zieminski and Richard Chang