By Barani Krishnan
Investing.com -- Crude prices settled just a touch lower on Wednesday despite an unexpected build in U.S. stockpiles, as oil bulls pushed forth with their determination to prolong the market’s three-month rally and achieve $45 for a barrel in the near-term.
“It looks like $45 is the target for the longs in the market, though there are concerns from the broader trading community that as prices push higher, we will see U.S. drillers return to producing fields to add to the already higher output due from OPEC by next month,” said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut.
“If we have another round of economic curbs because of the new wave of coronavirus infections, then we could certainly be overextended at these prices.”
New York-traded West Texas Intermediate, the benchmark for U.S. crude futures, settled down just two cents at $41.90 a barrel. It fell as much as 78 cents earlier in the session to $41.14. On Tuesday, WTI reached a four-month high of $42.40.
London-traded Brent, the global benchmark for oil, settled down 3 cents at $44.29. It hit $44.88 on Tuesday, its highest since March.
Oil has been in a rally mode for three months now, going from nearly minus $40 to positive $40, likening the proverbial phoenix rising from its ashes.
The uptrend has held as bulls focused on the demand recovery for gasoline since the lifting of Covid-19 lockdowns in May, despite threats of new curbs on businesses from another wave of the virus, which has already infected 4 million Americans and killed at least 145,000.
That aside, the Saudi-dominated Organization of the Petroleum Exporting Countries and its allies led by Russia will roll back from August some 2 million barrels from the 9.6-million barrel per day in production cuts observed since May.
Wednesday’s price action came after the Energy Information Administration reported that U.S. crude stockpiles rose by 4.9 million barrels for the week ended July 17. Analysts had expected a draw of 2 million barrels instead.
The EIA said the inventory gain came as crude imports rose by 373,000 barrels last week, while refiners processed less oil into fuel products such as gasoline and diesel. The increase rolled back by 67% the crude drawdown of 7.5 million barrels reported by the EIA during the previous week to July 10.
Oil stored at the Cushing, Oklahoma facility that takes delivery of contracted WTi barrels itself rose by 1.37 million barrels last week, far more than expectations for a build of 769,000 barrels.
On the fuel products side, distillate inventories, largely made up of diesel, rose by 1.1 million barrels versus expectations for a drop of 618,000 barrels. That build also negated the previous week’s draw of 453,000 barrels.
But gasoline stockpiles fell by 1.8 million barrels, extending the previous week’s 3.1 million barrel draw and beating forecasts for a decline of 1.4 million.
Over and above the stockpiles, U.S. oil production rose for the first time in five weeks, growing by an estimated 100,000 barrels per day last week to reach 11.1 million barrels daily.