Oil down 3 percent despite U.S. stockpile drop; pre-OPEC mood glum
Oil fell nearly 3 percent on Wednesday as traders and investors ignored a fifth straight weekly decline in U.S. crude stockpiles to focus instead on a big build in distillates, including diesel, as the peak season for U.S. road travel gets under way.
Glum sentiment ahead of Friday's meeting of the Organization of the Petroleum Exporting Countries also weighed on the market. OPEC, which pumps more than a third of the world's oil, is expected to reject any calls for output cuts, continuing to produce about 2 million barrels per day above demand.
U.S. crude inventories fell 1.95 million barrels last week, more than the 1.7 million forecast by analysts in a Reuters poll, a report from the government-run Energy Information Administration (EIA) showed.
Crude stocks at the Cushing, Oklahoma, delivery hub for U.S. oil also fell, along with gasoline stocks.
But distillate stockpiles, which include diesel and heating oil, rose by 3.8 million barrels, nearly four times the 1.1-million-barrel build forecast.
Crude oil futures, already volatile from the combination of a flighty dollar .DXY and the bearish mood over OPEC, briefly cut losses on the EIA report before falling 3 percent in afternoon trade.
Brent crude LCOc1 settled down $1.69, or 2.6 percent, at $63.80 a barrel.
U.S. crude CLc1 also settled down 2.6 percent, or $1.62, at $59.64.
Ultra-low sulphur diesel HOc1 closed almost 3 percent lower, while gasoline RBc1 fell 1 percent.
"I think the fact the market came back down after paring losses at first is telling of the sentiment that people don't really think this is a very bullish report," said analyst Gene McGillian of Tradition Energy in Stamford, Connecticut.
McGillian said consistent draws for gasoline and distillates would be a true indication of demand. "If not, with refinery runs of above 93 percent, we could end up with a glut of refined products in storage rather than crude now," he added.
Analyst Carsten Fritsch of Frankfurt-based Commerzbank agreed. "A market that does not rally on falling inventories and a slumping U.S. dollar looks vulnerable to the downside."
Comments by OPEC ministers in Vienna this week have reinforced the view that big Middle East oil producers will continue pumping nearly flat-out for months to come.
"There is consensus among Gulf OPEC countries, and others, to keep the (production) ceiling unchanged," an OPEC delegate told Reuters in Vienna. "Nobody wants to rock the boat."