NEW YORK Oil prices surrendered much of Thursday's early gains after a build in U.S. crude inventories despite higher refinery runs stole attention from a global oil producer pact that had sharply boosted the market in recent days.
The U.S. government's Energy Information Administration (EIA) said crude inventories in the country rose by 2.1 million barrels last week, versus a stockpile draw reported on Wednesday by industry group American Petroleum Institute (API). [EIA/S]
While the crude build was just about half of what analysts polled by Reuters had expected for the week to Feb. 12, the EIA also cited record high gasoline inventories and higher stocks of distillates that include heating oil and diesel.
Oil prices had risen more than 14 percent over the last three days after a plan by Saudi Arabia and Russia, endorsed without commitment by Iran on Wednesday, to freeze oil output at January's highs.
Thursday's bearish EIA data, if followed through by more U.S. crude stockpile growth, could negate the market's hopes in seeing continued price recovery from the production freeze plan, traders and analysts said.
"We should see crude sell off in the days to come," said Tariq Zahir, crude oil trader and fund manager at Tyche Capital Advisors in Long Island, New York. "We're still in a very well-supplied market and with refinery maintenance coming up and warmer weather heading to the U.S. East Coast, we are likely to see substantial builds in the weeks to come."
Brent LCOc1, the global benchmark for crude, was up 20 cents at $34.70 a barrel by 12:37 p.m. EST (1737 GMT), having risen more than $1.20 earlier. It had gained a total of more than $4 between Friday and Wednesday.
U.S. crude CLc1 was up 32 cents at $30.98 a barrel, after an earlier peak at $31.98.
The Saudi-Russian production freeze plan, also joined by Qatar and Venezuela, is the first such deal in 15 years between the Organization of the Petroleum Exporting Countries and non-OPEC members.
Iran's Oil Minister Bijan Zanganeh had welcomed the plan on Wednesday without committing to it.
Iran exported about 2.2 million barrels per day (bpd) of crude before 2012, when sanctions imposed by world powers to curb Tehran's nuclear program cut shipments to about 1.1 million bpd. The sanctions were lifted last month and sources familiar with Iranian thinking have said Tehran will not freeze output at current levels.
While oil producers hope their efforts will end the 20-month long selloff that had brought crude prices down from $100 a barrel in mid-2014, the only certainty ahead could be choppier markets.
"What we see still is extreme volatility," said Carsten Fritsch, analyst at Commerzbank. "I would not be surprised to see prices retreating again by a big margin in coming days."
(Additional reporting by Alex Lawler in London; Editing by Adrian Croft and Chris Reese)
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First Published On : Feb 18, 2016 23:45 IST