Oil prices fell on Wednesday after the U.S. government reported record-high crude inventories, but the market did not sell off as much as some thought as weekly supply builds were lower than an industry group had estimated.
The U.S. Energy Information Administration said domestic crude oil stocks rose by almost 9 million barrels last week to reach nearly 407 million, their highest since the government began keeping records in 1982.
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But the build the EIA cited was about a third lower than the nearly 13 million barrels reported for the week to Jan. 23 by the American Petroleum Institute on Tuesday. A Reuters poll on Tuesday forecast a build of just above 4 million barrels for last week.
Crude futures pared their losses after the release of the EIA data.
Benchmark Brent crude oil <LCOc1> was down 61 cents at $48.99 a barrel by 12:15 p.m. ET (1715 GMT), off its session low of $48.65.
U.S. crude <CLc1> dropped $1.23 to $45.00, after falling to $44.52 earlier.
"This inventory is bad, but not so bad" as expectations set by the API data, said Dominick Chirichella, senior partner at the Energy Management Institute in New York.
The EIA report also contained some positives for oil products, such as drops of nearly 3 million barrels in gasoline stocks and almost 4 million barrels in diesel and heating oil inventories. [EIA/S]
Even so, some traders said they expected crude futures to come under further pressure in coming days as the realization of the oversupply situation in the United States hits home.
"The sub-90 percent refinery utilization is causing oil supplies to back up, and the downward pressure on prices should continue," said John Kilduff, a partner in New York energy hedge fund Again Capital.
"Refined product demand continues to be the sole source of strength for the market, but it is not enough to overcome the tidal wave of crude oil supplies for now."
Fast-growing U.S. shale output has pushed oil prices almost 60 percent lower since June, with losses accelerating after the Organization of the Petroleum Exporting Countries said it would not cut production in a bid to preserve its market share.
Goldman Sachs analysts said in a Tuesday note that they expected U.S. crude, also known as WTI, to remain near $40 a barrel in the first half of this year.
(By Barani Krishnan; Additional reporting by Robert Gibbons and Samantha Sunne in New York, David Sheppard and Himanshu Ojha in London, and Florence Tan in Singapore; Editing by David Evans, William Hardy and Lisa Von Ahn)