Oil turns lower after bigger-than-forecast U.S. crude build

Wed May 4, 2016 3:43pm EDT
 
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By Jessica Resnick-Ault and Catherine Ngai

NEW YORK (Reuters) - A bigger-than-expected build in U.S. crude inventories to fresh record highs pushed oil markets lower on Wednesday after an early rally over concerns about production cuts in Canada's oil sands region due to a wildfire.

U.S. crude stocks, which have been setting record highs since January, grew 2.8 million barrels last week, government data showed, about a million barrels more than analysts' expectations. Gasoline stocks also posted a surprise increase.

The data overshadowed concerns over evacuations in the Canadian province of Alberta, where a wildfire raged unchecked through the Canadian city of Fort McMurray in the heart of the country's oil sands region, prompting some companies, including Suncor Energy (SU.TO: Quote) and Royal Dutch Shell (RDSa.L: Quote), to cut back production.

"It's hard to see how it (the wildfire) wouldn't have a broader impact temporarily on pipeline exports," said John Kilduff, a partner at Again Capital Management in New York. "I think it was a legitimate scare that will prove transitory."

U.S. crude futures CLc1 settled at $43.78 a barrel, up 13 cents or 0.30 percent, while Brent crude LCOc1 settled down 35 cents or 0.78 percent at $44.62 a barrel.

Gasoline futures RBc1 fell 1.17 percent to $1.4925 a gallon, after the EIA data showed a surprise increase of the fuel in storage. The gasoline crack spread 1RBc1-CLc1, a key figure in determining refiner margins, fell by 7.5 percent to $18.28 a barrel in afternoon trading.

Brent crude has fallen more than 5 percent from Friday's high in response to rising output from the Organization of the Petroleum Exporting Countries <OPEC/O>, signs of economic slowdown in the United States and Asia, and a stronger dollar.

"It would not come as any surprise if speculative financial investors were to take profits against this news backdrop," said Carsten Fritsch, analyst at Commerzbank.   Continued...

 
The current price of gasoline is shown on a gas station sign in Encinitas, California August 4, 2015. REUTERS/Mike Blake