WTI futures retain losses after EIA inventories report, Libya supply speculations

West Texas Intermediate remained pressured on the downside even after government data showed US crude oil inventories fell for the first time in 11 weeks, defying expectations for a further build up, while supplies at the biggest US storage hub declined for a ninth straight week. Analysts feared the drop may be attributed to a backlog of deliveries through the Houston Ship Channel, which was closed due to an oil spill. Concerns of slowing growth in China and a possible reopening of vital Libyan oil export terminals that would ease supply worries pressured the market heavily. Losses were capped by better-than-expected economic data from the US that fueled optimism over demand prospects in the worlds biggest consumer.

On the New York Mercantile Exchange, WTI crude for delivery in May traded at $99.14 per barrel at 15:05 GMT, down 0.60% on the day. Prices shifted in a daily range between $99.83 and $98.86 per barrel. The contract fell by 1.8% on Tuesday, the most since March 5th, and settled at $99.74 per barrel, the lowest since March 26th.

Meanwhile on the ICE, Brent futures for settlement in the same month stood at $104.44 per barrel, down 1.12% on the day. Prices plunged to a five-month low of $104.12 per barrel, while days high stood at $105.85. The European crude benchmark lost 2% on Tuesday and settled at $105.62 a barrel, the lowest close since November 11th. Brent traded at a premium of $5.30 to its US counterpart from Tuesday’s close at $5.88.

A report by the Energy Information Administration showed that US crude inventories fell by 2.38 million barrels in the seven days through March 28th, defying the median forecast of seven analysts surveyed by Bloomberg for a 2.5-million jump. At 380.1 million barrels, U.S. crude oil inventories are in the upper half of the average range for this time of year.

Phil Flynn, senior market analyst at the Price Futures Group in Chicago, said for Bloomberg: “People aren’t concerned about the drop because it was related to the closure of the Houston Ship Channel. It’s not like those barrels disappeared. They are waiting on tankers and will be counted in next week’s report.”

Supplies at Cushing, Oklahoma, the biggest US storage hub and delivery points for NYMEX-traded contracts, declined for a ninth straight week. Stockpiles slid by 1.2 million barrels to 27.3 million, the lowest in four years. US crude output jumped by 2 000 bpd to 8.19 million bpd.

Refineries operated at 87.7% of their operable capacity, up from 86.0% in the preceding period, outstripping analysts projections for a jump to 86.4%. Meanwhile, US crude imports slid by 786 000 barrels per day to 6.8 million bpd. Over the last four weeks, crude oil imports averaged about 7.3 million barrels per day, 6.1% below the same four-week period last year.

Both motor gasoline and distillate fuel production increased last week, averaging 9.0 million and 4.8 million barrels per day, respectively.

Total motor gasoline supplies fell by 1.6 million barrels last week to 215.6 million, compared to forecasts for a 2-million decline. Distillate fuel inventories, which include diesel and heating oil, rose by 0.55 million barrels to 113 million. Analysts had expected a 300 000-barrel drop.

The market drew support after better-than-expected economic data from the US brightened demand outlook in the worlds biggest consumer after inclement winter weather suppressed its economic activity.

The Commerce Department reported that US factory orders jumped by 1.6% in February, following a 1.0% contraction in January. This was the fastest growth in seven months and outstripped expectations for a 1%-jump.

Meanwhile, payrolls processor ADP reported that the US private sector added 191 000 workers last month, little short of economists expectations for a jump to 195 000. February’s number was revised up by 39 000 to 178 000.

Libya hopes

However, the oil market, and particularly the Brent crude benchmark, were heavily pressured after the announcement a rebel group might reach an agreement with the Libyan government to reopen vital eastern oil export terminals with a total capacity of 600 000 barrels per day, spurring hopes for an end to the standoff, which has crippled the nation’s oil output, its main source of revenue. A senior rebel leader told Reuters that the reopening could come through within days.

The prospects of rising Libyan crude supplies, which are currently are around a tenth of its capacity, drove front-month Brent prices down to parity with the June contract, shifting the market out of normal backwardation into contango, which signals weak demand and ample supplies.

A government spokesman confirmed on Wednesday that an agreement could be reached within that time window. “Negotiations are still ongoing, but we expect an agreement to open the ports,” a spokesman for Prime Minister Abdullah al-Thinni said, cited by CNBC.