Oil futures came under pressure Wednesday on fears that rising U.S. oil stocks and shale output are undercutting efforts by major producers to rein in global supply.
Brent crude, the global oil benchmark, fell 0.17% to $52.02 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were down 0.14% at $49.49 a barrel.
The American Petroleum Institute cast a cloud over the market after the industry group released data showing U.S. crude inventories rose 900,000 barrels last week while gasoline supplies jumped by 4.4 million barrels. Official data is due from the U.S. Department of Energy later on Wednesday.
The API data is alarming because this is the time of year stockpiles usually fall as refiners process more crude to make gasoline and diesel ahead of the U.S. summer driving season.
"Right now the market sentiment seems to be changing and becoming more negative," said Eugen Weinberg, an analyst at Commerzbank. "I would not be surprised to see prices come under considerable pressure today should the data from the API be confirmed by the DOE."
U.S. production has been rising weekly for more than two months, and if the upswing persists it may thwart efforts by the Organization of the Petroleum Exporting Countries and other producers such as Russia to reduce global inventories to five-year averages, analysts say.
Investors are also unsure about whether OPEC will decide to extend its production cut at its next meeting on May 25 in Vienna. The uncertainty helped pull down oil prices 7% last week.
Russia's noncommittal stance is another sore spot. So far, Moscow hasn't signaled support for an extension to the output cuts. Without Russia's participation, smaller producers may not be so willing to stick to their parts of the deal.
Russia is the world's biggest oil producer and agreed to cut 300,000 barrels a day of output by the end of this month.
If Russia backs away, that would shake up market psychology. But some say it may not necessarily derail OPEC's effort because it could prompt other participants to cut more to prevent prices from slumping.
"Our base scenario assumes ongoing Russian cooperation, although we do consider it somewhat less likely than the OPEC extension," said Timothy Evans, a Citi Futures analyst.
Nymex reformulated gasoline blendstock--the benchmark gasoline contract--fell 0.79% to $1.61 a gallon. ICE gasoil changed hands at $466.75 a metric ton, up $3.00 from the previous settlement.
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U.S. oil futures rose Wednesday after U.S. data showed refiners gobbled up more crude oil than ever from storage tanks, drawing down stockpiles.
But prices pared gains and dropped back below $50, as falling fuel prices weighed on the oil market.
"What we're seeing is refineries returning from maintenance season, kicking up runs to an all-time modern record for crude processing, and turning the crude oil surplus into petroleum products," said Andy Lipow, president of Lipow Oil Associates.
U.S. crude futures settled up 6 cents, or 0.12%, at $49.62 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, fell 28 cents, or 0.54%, at $51.82 a barrel on ICE Futures Europe.
The U.S. Energy Information Administration reported that U.S. crude inventories fell 3.6 million barrels last week. The draw was significantly more than analysts and traders were expecting, and a contrast to the nearly 900,000-barrel increase reported Tuesday evening by the American Petroleum Institute, an industry group.
That helped eat away at a persistent supply overhang and spurred buying. Oil prices have tumbled recently amid ebbing faith in the ability of the Organization of the Petroleum Exporting Countries to bring supplies back in balance with demand.
Refiners processed nearly 17.3 million barrels of oil a day last week -- the highest ever in EIA data. Refinery utilization of 94.1% was the highest level for this time of year since April 2001.
But their fuel output overwhelmed demand, sending millions of barrels of gasoline and diesel into storage tanks. Gasoline stockpiles grew by 3.4 million barrels last week. Diesel stockpiles also increased unexpectedly, rising by 2.7 million barrels.
"As the crude surplus has been narrowing this month, the gasoline supply overhang has been stretching," Jim Ritterbusch, president of Ritterbusch & Associates, wrote in a client note.
Gasoline futures fell 3.27 cents, or 2.01%, to $1.5903 a gallon -- a fresh one-month low. Diesel futures fell 0.85 cent, or 0.55%, to $1.5367 a gallon.
Mark Waggoner, president of Excel Futures, said he is optimistic that positive economic data and a stock market rally indicate that the U.S. economy is strong enough that drivers will take to the roads this summer and soak up the extra gasoline.
But some analysts are less confident.
"I think this is a very mixed report, and we're advising not to buy the knee-jerk rally," said Chris Kettenmann, chief energy strategist at Macro Risk Advisors. He said a 515,000 barrel-a-day increase in net oil imports is a "pretty damning" signal that the glut of oil isn't easing rapidly enough to justify oil prices above $50 a barrel.
"The OPEC-led cuts were supposed to usher in an accelerated drawdown in U.S. inventories," Mr. Kettenmann said. "It's a waiting game. I'm not willing to wait around."
Neanda Salvaterra and Jenny W. Hsu contributed to this article.
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(END) Dow Jones Newswires
April 26, 2017 15:55 ET (19:55 GMT)