Brent oil was above $109 a barrel on Wednesday after a fall in stockpiles at the Cushing delivery point for U.S. crude with prices constrained by weak economic data. Investors are also assessing the prospects for oil demand after the U.S. and Europe emerge from severe cold and refiners take plants down for maintenance. U.S. crude inventories at the Cushing, Oklahoma delivery hub fell by 1.1 million barrels last week, data from industry group the American Petroleum Institute (API) showed.
Overall domestic stockpiles rose by 822,000 barrels. Brent crude had slipped seven cents to 109.32 dollars a barrel. U.S. oil rose 35 cents to 102.18 dollars. “I think the story really is the divergence between (U.S.) WTI prices and Brent prices because of the API figures,” said Christopher Bellew, oil futures broker at Jefferies Bache. U.S. crude’s discount to Brent has narrowed to less than seven dollars a barrel for the first time since early October.
“There’s a little bit of weakness in Brent, possibly because there’s no fresh bad news on the geopolitical front. However, we’re still holding above 109 dollars and it could work its way back up to 110 dollars,” Bellew said. Ongoing tensions in North African exporter Libya have pressured supplies of Brent since the middle of last year. More than 100 rockets fired in clashes between rival government-paid militia knocked out a power plant in southern Libya on Tuesday in yet another fresh clash.
The gain in overall U.S. crude oil stockpiles was, meanwhile, lower than analyst expectations for an increase of 1.2 million barrels. Gasoline stocks fell by 314,000 barrels, compared with expectations in a media poll for a one million barrel decline.
Distillate fuel stockpiles, which include diesel and heating oil, fell by 693,000 barrels, compared with expectations for a 1.2 million barrel drop, the API data showed. U.S. home price gains slowed in December, underscoring a loss of momentum in the housing recovery, while consumer confidence drifted lower this month. But the weakness in the housing sector may have been in part due to the bitter cold and severe snowstorms. Oil markets are also watching the outlook for demand in China. China corporate debt has hit record levels and is likely to accelerate a wave of domestic restructuring and trigger more defaults as credit repayment problems rise.
