Crude oil prices were more or less muted in early Wednesday trading as investors wait for confirmation of a surprise build in oil and gasoline inventory levels. File photo by Monika Graff/UPI |
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June 28 (UPI) -- A brief rally in crude oil prices came under pressure early Wednesday as the broker market responded to a surprise build in inventory levels.
The American Petroleum Institute, an industry group, reported late Tuesday that U.S. crude oil inventories increased by about 850,000 barrels last week, a surprise build given the expectation of a draw of around 2.5 million barrels. Inventories of gasoline also moved against forecasts this week, showing a build of 1.4 million barrels.
Analysts had expected declines in inventory because of the impact on the U.S. Gulf Coast from Tropical Storm Cindy.
The price for Brent crude oil was relatively unchanged from the previous close at about 9:05 Eastern U.S. time to $46.72 per barrel. West Texas Intermediate, the U.S. benchmark for the price of oil, was down 0.14 percent to $44.18 per barrel.
Crude oil prices could move strongly in either direction after official inventory figures are released by the U.S. Energy Information Administration. Figures released by API and EIA have varied considerably in recent weeks, sparking questions about the validity of the data.
"When you have two groups providing potential market moving data and continue to report different numbers every week, it is obvious that one or both of the groups releasing the data is getting it wrong," Phil Flynn, a senior market analyst for the PRICE Futures Group in Chicago, said in a daily emailed newsletter.
Crude oil prices are relatively unchanged from this time last year even as the Organization of Petroleum Exporting Countries aims to correct the supply overhang with managed declines in production. Parties to the agreement will review the arrangement next month and industry analysts are suggesting deeper cuts may be necessary.
From Flynn's perspective, the market may be acting to restrict operations in U.S. shale basins, which have been more resilient to lower oil prices than initially expected.
"A big drop in Permian oil production should be raising concerns," he said. "Production in the shale sweet spot is down over 14 percent per well year-over-year and that is expected to fall to over 30 percent lower by the end of the year."
