Oil eases off one-month high on surprise US build

NEW YORK — Oil prices settled a shade firmer on Wednesday, easing from one-month highs, as support from an outage at the largest UK North Sea oil field was offset by a surprise increase in US crude inventories to a record high limited price gains.

News of the unplanned outage of the 180,000- barrels- per- day Buzzard field in the North Sea had already began to support prices on Tuesday. Sources said the repairs would take one to two days.

Prices, however, turned lower briefly on Wednesday after the US government reported a rise in crude inventories of 1.6 million barrels last week.

Analysts had expected a decrease of 435,000 barrels, and the build reported by the Energy Information Administration came as a double surprise after trade group the American Petroleum Institute (API) reported a 1.8 million-barrel draw late on Tuesday.

“Yesterday’s API report gave the market a bullish head- fake via three chunky draws, hence a build to crude stocks and minor draws to the products is causing a tempering of bullish optimism,” said Matt Smith, director of commodity research at ClipperData in Louisville, Kentucky.

Brent futures ended the session up 19 cents, or 0.40%, at $ 54.36 a barrel after earlier touching $ 55.09, last traded on March 8. US crude settled 12 cents, or 0.20%, higher at $51.15.

“The crude build caught the market leaning the wrong way. Crude exports dropped to 575,000 bpd ( barrels per day) this week, versus over one million bpd last week,” said David Thompson, executive vice-president at Powerhouse, a commodities-focused broker in Washington. “The selling most likely includes a fair number of sell stops being hit.”

Still, there were positives in the data, traders and analysts said.

“Overall we think the data is fairly neutral,” Standard Chartered said in a note.

It said total crude and product inventories fell two million barrels relative to their five-year average, in the right direction but significantly less than the previous week’s 8.3 million barrel draw.

An output cut from Jan. 1 led by the Organization of the Petroleum Exporting Countries (OPEC) helped lift prices off last year’s lows but rising US output and high crude stocks have capped the rally. Saudi Arabia cut the May official selling prices for its light crude oil for Asian customers, in line with expectations, but raised the price for oil sales to the United States. OPEC and non- OPEC producers, including Russia, together cut supply by about 1.8 million bpd for six months and are considering whether to extend the agreement.

The surplus is likely to fall even without a prolonged cut, JBC Energy analysts said. “In the event of OPEC/non- OPEC not extending the cuts into the second half, the world would still continue to draw stocks at a mild pace of about 200,000 bpd until September, thereby lending support to prices one way or another.” —