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)