Oil prices steadied during trading on Wednesday, despite data from the US Energy Information Administration showing a 6.8 million barrel rise in US crude stocks. Nexen photo.

Oil prices recover during session despite 6.8 million barrel rise in US crude inventories

Oil prices recovered in trading on Wednesday after tumbling early in the session following the release of US Energy Information Administration data showing US crude stocks rose by 6.8 million barrels last week.

By 1:39 p.m. EST, Brent crude rose 21 cents to $68.73/barrel, and US WTI was up 9 cents to $64.59/barrel.  The Canadian Crude Index was down $2.19 to $34.85.

“Strong demand in the major refined products categories is supporting the entire petroleum complex after the data release,” David Thompson, executive vice-president at Powerhouse told Reuters.

US gasoline futures for March were down 0.1 per cent to $1.8828/gallon.

“If this week’s drop is due to weather-related, unplanned incidents it may not yet herald the onset of turnaround season. However, those days are rapidly approaching,” Thompson said.

On Wednesday, the EIA reported US crude stocks rose more than analysts had anticipated and gasoline and distillate inventories fell.  Analysts surveyed prior to the release of the data forecast US crude inventories to rise by 126,000 barrels.

The increase in crude stocks comes after 10 weeks of declines.

“Strong demand in the major refined products categories is supporting the entire petroleum complex after the data release,” said Thompson. He added that demand for gasoline and diesel is stronger than year-ago levels.

Crude inventories at the Cushing, Oklahoma, delivery hub were down by 2.22 million barrels, according to EIA data.

Refinery crude runs were down by 470,000 barrels per day (b/d) and refinery utilization rates dropped by 2.8 per cent.

“The report was somewhat bearish, with the large crude oil inventory rise offset by another sizeable decline of inventories at the Cushing, Oklahoma delivery hub and a rebound in gasoline demand on the week,” John Kilduff, partner at energy hedge fund Again Capital, told Reuters.

He added “Refining activity is finally slowing, allowing for oil inventory build, which should persist over the next several weeks.”

US production rose to 9.92 million b/d, and is expected to hit 11 million b/d by 2019, according to the EIA.  In 1970, US output hit a record high of 10.04 million b/d.

“The rig count will only continue to rise and the U.S. system will only become more efficient,” Matt Stanley, a fuel broker at Freight Services International told Reuters.  He said rising production will likely pressure crude prices.

“I see a correction on the horizon down towards $60 before the inevitable OPEC minister comes out and talks about new cuts,” he said.