Energy

Oil settles at $49.62, eking out 6-cent gain after big fall in US crude stockpiles

Rusted out 'pump-jacks' in the oil town of Luling, Texas.
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Oil prices rebounded from earlier losses on Wednesday after data showed a larger-than-expected falloff in U.S. crude inventories, a salve for investors after several days of declines on worries about the slow pace of global efforts to reduce a glut.

U.S. commercial crude inventories fell by 3.6 million barrels to a total of 528.7 million barrels in the week through April 21, the Energy Information Administration said.

U.S. crude futures have slipped in six of the last seven days, as investors have grown impatient with high inventories after last year's landmark deal by the world's major oil producers to cut output.

The U.S. government data counters Tuesday's report from industry group the American Petroleum Institute that showed an unexpected build in inventories.

However, gasoline and distillate stockpiles grew, while U.S. production and imports increased, so the path for higher prices remains tentative, analysts said.

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U.S. West Texas Intermediate (WTI) ended Wednesday's session 6 cents higher at $49.62, after after earlier falling about 1 percent.

North Sea Brent crude, the international benchmark for oil prices, pared losses to trade down 37 cents at $51.73 per barrel by 2:35 p.m. ET (1835 GMT). Brent is about 8 percent below its April peak.

Refining capacity utilization rose to 94.1 percent, highest since November 2015. That boosted gasoline inventories at 241 million barrels, or about where inventories were at this time in 2016, which sapped refining margins.

U.S. gasoline futures were down 2.2 percent on Wednesday, and are now down slightly on year to date.

Analysts say lackluster gasoline demand could leave stockpiles of the fuel elevated even through the summer driving season, when consumption surges. That would potentially hurt demand for feedstock crude oil.

In January, sales of gasoline by refiners was down 6 percent from the year earlier, the latest EIA data available.

"Refiners are obviously cranking out large volumes of refined products now, and are facing a lackluster gasoline demand environment," said John Kilduff, partner at energy hedge fund Again Capital LLC in New York.

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Brent and WTI also found support from Saudi Energy Minister Khalid al-Falih, who said he was interested in talks between the Organization of the Petroleum Exporting Countries and non-OPEC producers to stabilize oil prices.

OPEC and a handful of big producers, including Russia, pledged to cut output by 1.8 million barrels per day (bpd) in the first half of 2017. Gulf and some other producers have indicated cuts could be extended to the end of 2017. An extension will be discussed when OPEC meets in May.

"The market remains heavy with doubts about OPEC's ability to achieve a successful extension of the current deal with Russia adopting a lukewarm 'wait and see' approach," said Ole Hansen, head of commodity strategy at Saxo Bank.

The average value of the Brent crude forward curve has fallen by over $5 per barrel since the start of the year, when the OPEC-led supply cut started.

The slump in Brent is a result of record crude oil volumes in circulation on ships around the world. Thomson Reuters Eikon shipping data showed 50 million barrels per day were booked for shipment on tankers this month, up 10 percent since December.

— CNBC's Tom DiChristopher contributed to this report.