The crude oil tanker Aleksey Kosygin sails out from the city and passes underneath the Yavuz Sultan Bridge. (Photographer: Kostas Tsironis/Bloomberg)

Oil’s Rally Weakens as Industry Sees Surprise Stock Build

(Bloomberg) -- Crude’s rally faltered after an industry report showed U.S. crude stockpiles unexpectedly rose last week.

Futures in New York, which were rising closer to $65 a barrel in after-hours trading, plunged back to the level where they settled on Tuesday, at $64.47. The American Petroleum Institute was said to have reported domestic oil inventories increased 4.76 million barrels last week. That would be the first build in stockpiles since November if data from the Energy Information Administration confirms it on Wednesday.

Refiners are in the midst of maintenance with many plants planning to take down key process units in February, further weakening their demand for oil.

“Last week, we saw refinery utilization down a little bit. We’ll probably see it down more this week,” James Williams, president of London, Arkansas-based energy researcher WTRG Economics, said by telephone. If the EIA shows a build in supplies tomorrow, “it will take a little bit off prices.”

The U.S. benchmark closed at the highest since 2014 during Tuesday’s session amid expectations of falling U.S. inventories and after assurances from Russian and Saudi Arabian oil chiefs that a historic production accord by the world’s largest producers will endure. BBL Commodities LP, one of the world’s largest oil-focused hedge funds, believes Brent futures, the London-traded benchmark, will climb to $80 this year as stockpiles drop rapidly on OPEC’s curbs.

Oil’s Rally Weakens as Industry Sees Surprise Stock Build

Prices have been rallying toward to $65 a barrel in New York and $70 in London as the Organization of Petroleum Exporting Countries and allied producers curb output for a second straight year.

West Texas Intermediate for March were unchanged from the close as of 4:59 p.m. on the New York Mercantile Exchange after reaching $64.88 a barrel before the API report. Total volume traded was about 7 percent below the 100-day average. The February WTI contract expired Monday.

Brent for March settlement surged 93 cents to end the session at $69.96 on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $5.49 to WTI.

U.S. crude inventories probably fell by 2 million barrels last week, according to a Bloomberg survey of analysts. Stockpiles are sitting at the lowest level since February 2015, according to the most recent EIA data.

The API report was also said to show that stockpiles in the Cushing, Oklahoma storage hub fell by 3.57 million barrels last week. Gasoline inventories climbed by 4.12 million barrels and distillate supplies declined by 1.28 million.

Oil-market news:

  • Libya’s Sara oil fields were said to increase output to 50,000 barrels a day after resuming pumping on Sunday, according to a person familiar with the situation.
  • The International Energy Agency probably will make an upward revision to its U.S. production outlook and a downward shift in its Venezuelan supply forecast, Executive Director Fatih Birol said in an interview in Davos.
  • OPEC is more focused on the price of oil and short-term revenues rather than curbing inventories to their five-year average, Citigroup analysts wrote in a report.

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