NEW YORK Oil prices held steady on Wednesday as buyers banked on production limit plans to counter record high U.S. crude stockpiles, keeping alive hopes the market had bottomed from the selloff that began nearly two years ago.
The U.S. government said crude inventories rose by 10.4 million barrels to a record high 518 million during the week to Feb. 26. That build reported by the U.S. Energy Information Administration (EIA) was almost triple the 3.6 million-barrel increase expected by analysts in a Reuters poll. [EIA/S]
Oil prices dipped on the data but recovered to trade barely changed from Tuesday's settlement.
Futures of Brent LCOc1, the global crude benchmark, were down 5 cents at $36.76 a barrel by 2:14 p.m. EST (1913 GMT). Brent had fallen 71 cents to a session low of $36.10 earlier.
U.S. crude's West Texas Intermediate (WTI) futures CLc1 were up 10 cents at $34.50, after sliding to an intraday low of $33.55.
Some analysts think the market will not sink back to 12-year lows hit in mid-February, when U.S. crude fell to around $26, and Brent traded at just above $27.
"We believe prices will see modest gains over the course of the year and we have likely seen the worst of price declines, unless the global economy actually moves into recession," said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management, who helps manage some $125 billion.
Anthony Headrick, energy market analyst at CHS Hedging, concurred.
"It seems more likely that $26 is in the rear view mirror at the moment," Headrick said. "Fundamentals remain bearish but prospects of OPEC freeze and downward cycle in U.S. output will likely limit a retest of the recent lows."
Oil began to sell off in mid-2014 when a global supply glut from excessive U.S. shale crude production began to pressure prices at above $100 a barrel. The slide steepened after OPEC members led by Saudi Arabia, which traditionally cuts output to support prices, started pumping oil at record highs to protect market share.
In recent weeks, however, OPEC and outside producers stepped up diplomatic activity to address the supply glut. Saudi Arabia, Qatar, Venezuela and non-OPEC producer Russia said on Feb. 16 they would freeze output at January's highs. WTI futures have risen 17 percent since, while Brent has gained 14 percent.
But some traders think the selloff will return as U.S. crude inventories continue to build from the refinery maintenance season.
"We could be in store for another large move down over the next few weeks," said Tariq Zahir at Tyche Capital Advisors who bets nearby WTI contract will weaken against forwards.
(Additional reporting by Alex Lawler in London; Editing by Susan Fenton, David Gregorio and Chizu Nomiyama)
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