Oil Rises After U.S. Stockpiles Fall

By Alison Sider and Christopher Alessi Features Dow Jones Newswires

Oil prices wavered between gains and losses Wednesday after U.S. data showed that crude stockpiles fell but gasoline inventories grew last week.

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Record U.S. oil exports and an increase in activity by refiners helped contribute to a 1.8-million-barrel draw from crude stockpiles. Analysts surveyed by The Wall Street Journal had anticipated an increase of 2.1 million barrels in crude stockpiles.

But gasoline inventories grew by 1.1 million barrels, as shipments that were directed toward the U.S. when refineries were offline following Hurricane Harvey showed up.

U.S. crude futures recently traded up 30 cents, or 0.58%, to $52.18 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, fell 35 cents, or 0.6%, to $58.09 a barrel on ICE Futures Europe.

Brent hit its highest settlement since July 2015 on Monday, closing at $59.02 a barrel, while U.S. crude futures posted their largest one-day advance of the year, to $52.22 a barrel.

Wednesday's report shows that the U.S. oil industry is getting back to normal following Hurricane Harvey, analysts said. Refiners increased their processing rates to 88.6% of capacity, up from 83.2% last week.

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"We're almost back to a normalized situation," said Bob Yawger, director of the futures division at Mizuho Securities USA Inc.

Some analysts said the increase in gasoline supplies in the U.S. data weighed on the market Wednesday. Analysts had anticipated a decline of 1 million barrels. Diesel stockpiles fell, according to the EIA data, but by less than expected.

"I'm surprised we didn't see continued decline in gasoline inventories as refiners did restore operations but they weren't fully on stream," said Andy Lipow, president of Lipow Oil Associates.

Gasoline futures fell 4.02 cents, or 2.37%, to $1.6586 a gallon. Diesel futures fell 0.43 cent, or 0.23%, to $1.8410 a gallon.

The steady increase in Brent in recent weeks has been driven in part by renewed market confidence in the Organization of the Petroleum Exporting Countries' plan to cut production and bring down the global supply overhang, as well as by fresh data from the International Energy Agency showing rising global demand growth. But WTI, the U.S. standard, has still lagged behind Brent, with the spread between the two benchmarks at its widest in about two years.

Crude exports increased to 1.49 million barrels a day last week -- the highest level on record -- as the wide price difference the U.S. and global benchmarks made exports lucrative.

Still, crude's rise has been limited.

"We had a terrific run up in the past week. I think the market is still processing what's happened in terms of supply and demand dynamics from hurricanes and a lot of noise from OPEC," said Adam Wise, managing director of natural resources at John Hancock Financial Services. "I think it's taking a little bit of a breather."

Geordie Wilkes, a research analyst at brokerage Sucden Financial Ltd., said some investors worry that sending crude prices too high could incentivize an uptick in U.S. shale production and exacerbate a global supply glut.

"The market is apprehensive about pushing [Brent] to $60 a barrel," Mr. Wildes said. "Any spike above $58 a barrel over the past 18 months hasn't really held," he added.

Write to Alison Sider at alison.sider@wsj.com and Christopher Alessi at christopher.alessi@wsj.com

U.S. crude prices rose Wednesday after government data showed crude stockpiles fell but gasoline inventories grew last week.

Record U.S. oil exports and an increase in activity by refiners helped contribute to a 1.8-million-barrel draw from crude stockpiles. Analysts surveyed by The Wall Street Journal had anticipated an increase of 2.1 million barrels in crude stockpiles.

But gasoline inventories rose by 1.1 million barrels, as shipments that were directed toward the U.S. when refineries were offline following Hurricane Harvey showed up. In all, total commercial crude and fuel stocks fell by 5 million barrels and stand at their lowest level since January, 2016.

U.S. crude futures rose 26 cents, or 0.5%, to $52.14 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, fell 54 cents, or 0.92%, to $57.90 a barrel on ICE Futures Europe.

Wednesday's report shows that the U.S. oil industry is getting back to normal following Hurricane Harvey, analysts said. Refiners increased their processing rates to 88.6% of capacity, up from 83.2% last week.

"We're almost back to a normalized situation," said Bob Yawger, director of the futures division at Mizuho Securities USA Inc.

Some analysts said the increase in gasoline supplies in the U.S. data weighed on the market Wednesday. Analysts had anticipated a decline of 1 million barrels. Diesel stockpiles fell, according to the EIA data, but by less than expected.

"I'm surprised we didn't see continued decline in gasoline inventories as refiners did restore operations but they weren't fully on stream," said Andy Lipow, president of Lipow Oil Associates.

Gasoline futures fell 4.48 cents, or 2.64%, to $1.654 a gallon. Diesel futures rose 0.1 cent, or 0.05%, to $1.8463 a gallon.

Wednesday was the second straight day of losses for Brent crude, which hit its highest settlement since July 2015 on Monday, closing at $59.02 a barrel, while U.S. crude futures posted their largest one-day advance of the year, to $52.22 a barrel.

"We had a terrific run up in the past week. I think the market is still processing what's happened in terms of supply and demand dynamics from hurricanes and a lot of noise from OPEC," said Adam Wise, managing director of natural resources at John Hancock Financial Services. "I think it's taking a little bit of a breather."

Geordie Wilkes, a research analyst at brokerage Sucden Financial Ltd., said some investors worry sending crude prices too high could incentivize an uptick in U.S. shale production and exacerbate a global supply glut.

"The market is apprehensive about pushing [Brent] to $60 a barrel," Mr. Wilkes said. "Any spike above $58 a barrel over the past 18 months hasn't really held," he added.

The steady increase in Brent in recent weeks has been driven in part by renewed market confidence in the Organization of the Petroleum Exporting Countries' plan to cut production and bring down the global supply overhang, as well as by fresh data from the International Energy Agency showing rising global demand growth. But WTI, the U.S. standard, has lagged behind Brent, with the spread between the two benchmarks at its widest in about two years.

Crude exports from the U.S. increased to 1.49 million barrels a day last week -- the highest level on record -- as the wide price difference between the U.S. and global benchmarks made exports lucrative.

Write to Alison Sider at alison.sider@wsj.com and Christopher Alessi at christopher.alessi@wsj.com

(END) Dow Jones Newswires

September 27, 2017 16:02 ET (20:02 GMT)