Oil up, then pares gains after U.S. inventory build data
By Barani Krishnan
NEW YORK (Reuters) - Oil prices rose almost 2 percent on Tuesday, but then pared gains in post-settlement trade after an industry group reported a surprisingly large weekly build in U.S. crude inventories.
The American Petroleum Institute (API) said U.S. crude stockpiles rose 4.6 million barrels in the week to Sept. 25 to reach 457.8 million barrels. Analysts polled by Reuters had expected an increase of only 102,000 barrels. [API/S] [EIA/S]
"It's certainly a pretty big build for U.S. oil stocks," said Chris Jarvis, analyst at Caprock Risk Management in Frederick, Maryland.
But some investors were encouraged that the API inventory figures also showed a drawdown of nearly 1.2 million barrels at the Cushing, Oklahoma delivery point for U.S. crude futures.
Cushing storage levels are key for the market's psyche and can temper headline numbers for oil inventories. Market intelligence firm Genscape estimated on Monday that Cushing stockpiles fell by around 1 million barrels last week, after back-to-back drawdowns of about 2 million barrels in two previous weeks.
Donald Morton, energy trader at Fairfield, Connecticut-based Herbert J. Sims & Co, said he expected the premium of the second month contract for U.S. crude's West Texas Intermediate benchmark would fall in relation to the front month, narrowing the contango chart structure.
"The contango in WTI would probably narrow a bit in response to the latest Cushing numbers from API.
After the API numbers, the gap between the two contracts CLc1-CLc2 narrowed to 36 cents a barrel by 5:11 p.m. EDT (2111 GMT). It was at 41 cents before the release of the report. Continued...