NEW YORK Oil prices jumped more than 3 percent on Wednesday, with U.S. crude futures returning to above $40 a barrel, after a larger-than-expected gasoline draw offset a surprise build in crude stockpiles in the No. 1 oil consumer.
U.S. crude inventories rose for a second week in row, gaining 1.4 million barrels last week, compared with analysts' expectations for a decrease of 1.4 million barrels, the Energy Information Administration (EIA) reported.
Gasoline stocks slumped by 3.3 million barrels, versus forecasts for a 200,000-barrel drop.
U.S. West Texas Intermediate (WTI) crude jumped $1.44, or 3.6 percent, to $40.95 a barrel by 12:10 p.m. EDT (1610 GMT). On Tuesday, it settled below $40 a barrel for the first time since April.
Brent crude rose by $1.30, or 3.2 percent, to $43.10. It hit a more than three-month low of $41.51 the previous day.
"We are not surprised to see spot prices rebounding on the gasoline draw. But I think this will be shortlived," said Tariq Zahir, trader in crude oil spreads at Tyche Capital Advisors in New York.
"The bottom line is the Street in the second quarter got a little ahead of itself in calling for rebalancing of supply-demand after Canadian and Nigerian supply disruptions. We are going into the third and fourth quarters with those supplies back online and refinery maintenance coming up."
Oil rallied from 12-year lows of $26-$27 in the first quarter to almost $53 in June, boosted initially by a failed OPEC plan to freeze output and later by supply disruptions in Canada to Nigeria and Libya.
But a global glut in motor fuels and other refined products since have stymied the rebound. Worries about slowing economies in Asia - the driver of oil demand growth - and Europe have weighed, along with near record-high OPEC output and signs of a new price war by Saudi Arabia for crude.
"The 3.3 million-barrel draw to gasoline stocks is likely a welcome surprise for refiners," said Troy Vincent, analyst at New York-based oil cargo tracker ClipperData. "But an unexpected, greater-than-1-million barrel build to crude stocks despite refinery utilization ticking higher by 0.9 percent should be cause for concern."
The glut has led many traders to predict lower prices going forth.
"We expect to see a little bit of price consolidation from here but our target really is for $35 WTI, which means any rebound you get will be more of a bear market correction," said Matthew Tuttle, chief executive of Tuttle Tactical Management in Riverside, Connecticut.
Goldman Sachs retained its 2017 forecast of $52.50 and near-term range of $45-$50 for WTI. But it added that oil's most recent decline came amid supportive factors such as the dollar weakening and refining margins for gasoline widening.
"It will take a strong reversal in positioning to create substantial new upside," Goldman said.
(Additional reporting by Alex Lawler in LONDON and Henning Gloystein in SINGAPORE; Editing by David Evans and Marguerita Choy)
This story has not been edited by Firstpost staff and is generated by auto-feed.
Published Date: Aug 03, 2016 22:07 PM | Updated Date: Aug 03, 2016 22:07 PM