By Timothy Puko
Oil prices are lower Wednesday despite a brief rebound as
worries about oversupply eclipsed news of a declining number of
working oil rigs and a stockpile addition smaller than
expected.
Light, sweet crude for January delivery fell 17 cents, or 0.4%,
to $42.70 a barrel on the New York Mercantile Exchange. Nymex oil
had dipped as low as $41.72 in early trading. Brent, the global
benchmark, fell 25 cents, or 0.5%, to $45.87 a barrel on ICE
Futures Europe.
Oil prices had made a small move into positive territory just
after 1 p.m. when oil-service company Baker Hughes Inc. reported
the U.S. oil-rig count fell by nine in the most recent week,
extending the drop reported a week earlier. The number of active
U.S. oil-drilling rigs, viewed by some as a signal about trends in
oil production, is down to 555, which is 54% lower than the peak in
October 2014. It has fallen in 12 of the past 13 weeks.
"The whole market seems to be trying to recover before the
holiday," said Peter Donovan, broker for Liquidity Energy in New
York. "The rig count number certainly helped more."
Prices had already been on the rebound since the U.S. Energy
Information Administration said crude-oil inventories rose by one
million barrels last week. That was about in line with analysts'
expectations for a 1.1-million-barrel increase, but fell far short
of the 2.6-million-barrel increase reported by industry group
American Petroleum Institute. The API report had led to selling
overnight and into the morning, brokers said.
"There's a real fear out there of another repeat of last year
when you had a stock build in December," a time of year when
stockpiles usually fall, said Scott Shelton, broker at ICAP PLC.
"People are nervous about it, but this report will give bulls some
comfort that we'll see something a little more seasonal."
Light, sweet crude for January delivery fell 46 cents, or 1.1%,
to $42.41 a barrel on the New York Mercantile Exchange. That has
halved the daily losses from earlier, when oil dipped to as low as
$41.72 before the EIA update. Brent, the global benchmark, fell 66
cents, or 1.4%, to $45.46 a barrel on ICE Futures Europe.
At 488.2 million barrels, U.S. crude oil inventories remain near
levels not seen for this time of the year in at least 80 years.
Despite the slight rebound, the heavy surplus is still bearish, and
traders largely recognize the glut, said Tim Evans, analyst at Citi
Futures Perspective in New York.
"There's some sense that the petroleum inventory data could have
been worse," Mr. Evans said. "But there's really nothing within the
data for last week that's really supportive."
Gasoline stockpiles also grew by 2.5 million barrels, compared
with analysts' expectations for a 500,000-barrel increase. And
distillates, which include heating oil and diesel, grew by one
million barrels, compared with analysts' expectations for a
500,000-barrel decline.
Those large increases helped pull both markets down after strong
rallies Tuesday. Gasoline futures recently fell 0.7% to $1.3809 a
gallon. Diesel futures fell 0.2% to $1.3976 a gallon.
Those large increases helped pull both markets back from strong
rallies Tuesday. Gasoline futures recently fell 1.8% to $1.3647 a
gallon. Diesel futures fell 0.3% to $1.3950 a gallon.
Analysts and brokers have been talking down the market all
morning, calling Tuesday's gains an overshoot from the downing of a
Russian military jet along the border between Syria and Turkey. The
trouble in the world's most prolific oil-producing region caused
oil prices to rally close to 3%, but many say it is less important
because oil supply is so strong around the world.
"We saw a three-session rally because of rising geopolitical
tension, but that rally was snapped when investors reminded
themselves of the fundamentals which are very bearish at the
moment, based on oversupply," said Kash Kamal, a senior analyst at
Sucden Financial in London.
President Vladimir Putin accused Turkey of a "stab in the back"
and of aiding terrorists. The Kremlin stressed that he wasn't
suggesting that Moscow would respond with any military action.
The market is also turning its attention to the meeting of the
Organization of the Petroleum Exporting Countries on Dec. 4 in
Vienna. Most analysts say the oil-producer group is likely to stick
to its strategy of pumping crude at a high pace to defend its
market share.
Comments from Saudi Arabia, OPEC's most influential member,
indicated a willingness to cooperate with other exporters in
supporting the oil market, but analysts remain skeptical.
"The odds of a significant grouping of non-OPEC producers,
including Russia, emerging with a plausible set of production cuts,
along with Iran and possibly Iraq, remain very small," said Seth
Kleinman of Citi Research. "[We] continue to expect nothing of
significance from next week's OPEC meeting."
Neanda Salvaterra, Georgi Kantchev and Lisa Beilfuss contributed
to this article.
Write to Timothy Puko at tim.puko@wsj.com
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(END) Dow Jones Newswires
November 25, 2015 14:37 ET (19:37 GMT)
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