West Texas Intermediate (WTI) oil futures, in an automatic response, cut down on losses in their North American trading on Wednesday, following data indicating oil supplies in the U.S. registered a supply draw that was twice as large as expected.
Nevertheless, investors seem to change their decisions with regards to oil futures as they contemplated the data and crude oil prices reached intraday lows in what could be seen as a disappointment for the large build at the primary U.S. delivery point in addition to greater-than-anticipated increases in both gasoline and distillate stockpiles.
The crude oil set for a January delivery on the New York Mercantile Exchange dropped 93 cents, or 1.83%, to a trade level of {currency}50.00 per barrel by 10:49 AM ET (15:49 GMT) in comparison to {currency}50.37 ahead of the report. WTI oil reached an intraday low of {currency}49.84 following the release.
According to the U.S. Energy Information Administration in their weekly report, crude oil inventories dropped by 2.389 million barrels in the December 2 week end. Market analysts anticipated a draw for crude-stock of 1.032 million barrels, while the American Petroleum Institute stated late Tuesday a supply draw of 2.21 million barrels.
As reported by EIA, the supplies at Cushing, Oklahoma, the primary delivery point for Nymex crude, increased last week by 3.783 million barrels. Last week, the total U.S. crude oil inventories stood at 485.8 million barrels, stated the press release, which was considered by the EIA to be “at the higher limit of the median range for this time of the year.”
The report also indicated that the gasoline inventories rose by 3.425 million barrels, in comparison to the expectations for an increase of 1.948 million barrels. At the same time, distillate stockpiles rose by 2.501 million barrels, in contrast to the 1.840 million gain forecasted.
Elsewhere, in London on the ICE Futures Exchange, the Brent oil for February delivery dropped by 76 cents, or 1.41%, to the amount of {currency}53.17 by 10:50 AM ET (15:50GMT), compared to the amount of {currency}53.55 prior the release.
The investors have started turning their attention towards a meeting of OPEC and non-OPEC members on December 10 in Vienna to set the details of the agreement for the cut in production to help relieve the global oversupply and support prices.
Even though the OPEC members have arrived at an agreement about the oil futures to reduce the daily output by million barrels and the non-OPEC producers promised another 600,000 barrel reduction, there have been doubts surfacing as to how effective the cuts could be at lowering massive oversupply that has put pressure for the prices to drop for over two years.
The oil production has been surpassing consumption by between one to two million bpd since late 2014.
Additionally, OPEC and Russia have announced that the output reached record highs since the deal was disclosed. This announcement added to the fears that global supply overhang could continue well in 2017.
In the meantime, the premium for Brent to the WTI crude contract remained at {currency}3.17 a barrel by 10:51 AM ET (15:51GMT), when compared to the difference of {currency}3.00 by the end of trading on Tuesday.
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