Oil Slips After Industry Report Points to Rising U.S. Stockpiles

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Oil Slips After Industry Report Points to Rising U.S. Stockpiles

Elizabeth Low

(Bloomberg) -- Oil edged lower after an industry report pointed to the first gain in U.S. crude stockpiles in five weeks following a recent cold blast that led to a spate of refinery outages.

Futures in New York slipped 0.4% to trade near $61 a barrel after ending Tuesday’s session little changed. The American Petroleum Institute reported crude inventories increased by 1.03 million barrels last week, while gasoline stockpiles expanded, according to people familiar. A technical indicator is also signaling prices are overbought and due for a correction.

U.S. drillers have restored about 80% of crude output in parts of Texas after the big freeze, although refiners are finding a return to normal more tricky. Impacts from the cold blast have also hit Asia, where plastic makers are facing surging prices for key feedstocks after American processors were shuttered.

Oil is still heading for a fourth monthly gain as the market tightens following deep production cuts by Saudi Arabia and an improving outlook for demand. Traders and investment bankers have made a raft of bullish calls and upward price revisions, while the prompt timespread for global benchmark Brent has firmed in a backwardation structure, helping to unwind bloated stockpiles.

“Oil looks like it sprinted a mile at top gear and at some stage it really needs to take a breather,” said Howie Lee, an economist at Oversea-Chinese Banking Corp. in Singapore. “Any correction could likely be just technical and should not derail oil’s general upward trend.”

U.S. gasoline stockpiles increased by 66,000 barrels last week, while crude inventories at the Cushing storage hub rose by 2.78 million barrels, the API said. Government data is due Wednesday, with the median estimate in a Bloomberg survey showing crude stockpiles are set to fall by 6.5 million barrels.

The Permian Basin in Texas is now producing about 2.9 million barrels a day after output was restored following the cold snap, according to data analytics firm OilX. The region typically pumps around 3.5 million barrels a day.

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