Singapore: US crude futures pared gains on Wednesday to trade almost half a percent lower after industry data showed that US crude stocks rose much more than expected, more than offsetting weakness in the dollar.
The US currency was almost flat and Japan’s benchmark Nikkei index was down just 0.2%, after the Dow Jones average closed at its highest in 14 months on Tuesday, when the dollar fell against the euro as Dubai debt default fears ebbed.
Data from the American Petroleum Institute, released after Tuesday’s settlement, showed that US crude stocks rose 2.9 million barrels last week, dwarfing the forecast in a Reuters poll for a 400,000 barrel increase.
“Oil sits in the cross-winds of a weaker near-term backdrop and a more favourable longer-term one,” ANZ’s senior commodities analyst, Mark Pervan, said.
“A lot now depends on forecast updates of the US winter season and the resilience of the US equity market. Both factors have been favourable to date.”
Nymex crude for January delivery fell 22 cents to $78.157 a barrel by 0203 GMT, after settling up $1.09, or 1.4% at $78.37 on Tuesday.
Brent crude fell 15 cents to $79.20.
Oil has rallied from below $33 last December but has held in a narrow band of $70 to $82 over the past two months. Some analysts see little chance prices will push above the range, given ample supplies and little sign of strengthening demand.
“The rub however, is that more good news is being priced in than bad news, suggesting prices could disappoint if the focus swings,” Pervan added.
The API data also showed distillate stocks rose 1.1 million barrels, defying the forecast that supplies fell 300,000 barrels, while gasoline stocks jumped 3.4 million barrels against the forecast of just a 1.0 million barrel increase.
“The API data showed an increase in stockpiles above expectations. Gasoline and distillates were also higher. The market is waiting for the EIA data now which tend to carry more weight in the market,” David Moore, Commonwealth Bank Commodities strategist in Sydney said.
He expected crude oil to plough a furrow between around $74 and $81.
“Inventories are still high while demand is relatively subdued, but the downside is limited ... when prices decline it attracts new buying supported by the view on macro economic recovery.”
Fresh direction will come later when the US Energy Information Administration issues its petroleum report.
The MSCI index of Asia Pacific stocks traded outside Japan rose 3.7% on Wednesday, while the Thomson Reuters index of regional shares rose half a percent.