May 9, 2012 / 3:48 AM / 6 years ago

Oil reverses losses on unexpected U.S. product draws

LONDON (Reuters) - Brent crude futures trimmed earlier losses, popping above $112 on Wednesday, supported by a larger than expected drop in U.S. gasoline inventories.

A motorist prepares to put fuel into her car at a petrol station in Melbourne July 3, 2008. REUTERS/Mick Tsikas

Any bounce was capped, however, by political turmoil in the debt-laden euro zone and a jump in U.S. crude stocks to the highest level since 1990.

Brent crude was up 5 cents to $112.78 a barrel by 1551 GMT, having fallen to as low as $113.31 earlier. Brent had been dropping for a sixth straight session, its longest losing streak since the middle of 2010.

U.S. crude was at $96.54 down 47 cents.

The official weekly inventory data from the U.S. Energy Information Administration (EIA) showed gasoline inventories dropped by 2.61 million barrels in the week to May 4, compared with analysts’ forecast for a 100,000 barrel draw.

The data also showed an unexpected fall in distillate stocks, which includes heating oil and diesel. Distillate stockpiles fell 3.25 million barrels, against expectations for a 100,000 barrel build.

“The products numbers were bullish and that is somewhat helping to turn tide in crude,” said Addison Armstrong, director of market research at Tradition Energy.

However, an increase U.S. crude stocks, ample production from Saudi Arabia and the struggling eurozone economy have also helped push Brent down from levels near $126 per barrel in April.

EIA figures showed a rise in crude oil stocks but by a smaller increment than a separate set of data from industry group American Petroleum Institute (API). Crude stocks are now at their highest level since 1990, excluding the U.S. Strategic Petroleum Reserves.<EIA/S>

In Greece, a highly fractured parliament struggled to cobble together a coalition, with the Leftist candidate for prime minister opposing a bailout deal crucial to the economy.

This stoked fears about whether the euro zone would be able to pull itself out of a debt crisis, weighing on equities and commodities across the board.

Leadership changes in France and Greece fanned worries that the political uncertainty could threaten austerity plans seen by some as key to tackling the euro zone debt crisis.

Saudi Oil Minister Ali al-Naimi reiterated on Wednesday that there was a surplus of oil in the market, following his earlier comments that the world’s top exporter is pumping around 10 million barrels per day and is storing 80 million barrels to meet any sudden disruption in supplies.

Higher production from Saudi Arabia has partly filled a supply gap caused by lower imports from sanctions-hit Iran. India has joined other Iranian crude buyers in Asia to cut back imports from the Islamic Republic.

Additional reporting by Francis Kan and Florence Tan in Singapore; Editing by William Hardy

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