Oil erases gains as US crude draw shy of API report

NEW YORK — Oil prices dipped in see-saw trade on Wednesday, hitting their highest in more than two years and then retreating after weekly US government inventory data showed the latest crude stock draw was not as big as an industry trade group had reported.

While oil settled lower, both global marker Brent and US crude benchmarks remained near the highest levels since July 2015, as lower global supply pushed markets higher.

“The market had a bit of a pull back today… prompted by a bit of profit taking,” said Gene McGillian, manager of market research at Tradition Energy in Stamford, Connecticut. “But, overall, the idea that the (Organization of the Petroleum Exporting Countries or OPEC) production cut will extend through 2018 and increased demand is tightening the supply balance and driving us higher overall.”

The US Energy Information Administration (EIA) said crude stocks fell 2.40 million barrels last week, exceeding the 1.80 million barrel draw analysts forecast in a Reuters poll, but short of the 5.10 million barrel decline reported late on Tuesday by the American Petroleum Institute (API).

“Oil prices fell since the release of the (EIA) report,” said Carsten Fritsch, oil analyst at Commerzbank AG in Frankfurt, Germany, noting that the crude draw was “significantly less than the API numbers.”

Brent futures settled down 45 cents, or 0.74%, at $60.49 a barrel, while US West Texas Intermediate ( WTI) crude was down eight cents, or 0.15% at $54.30 a barrel. Before the EIA report, Brent was trading at its highest since July 2015 on data showing the OPEC had significantly improved compliance with its pledged supply cuts and Russia was widely expected to keep to the deal.

Meanwhile, the WTI “Dec Red” — the spread between December 2017 and 2018 US crude — traded to as high as $ 1.83 a barrel, the strongest level since February 2014 before the oil price crash. WTI Dec. 2017’s premium to 2018 suggested that the end of the crude glut may be in sight.

On Wednesday, Gulf OPEC sources said members of OPEC was likely to continue its oil production curb through 2018. Member countries are scheduled to next meet in Vienna on Nov 30.

OPEC’s October output fell 80,000 barrels per day ( bpd) to 32.78 million bpd. Adherence to its pledged supply curbs rose to 92% from September’s 86%. Analysts and traders expect Russia to stick to its agreement to curb oil output by 300,000 bpd from 11.247 million bpd in October 2016. —