Brent crude rose towards $57 a barrel on Wednesday, paring some of the previous session’s sharp losses, after data showed US crude stocks fell for the first time in two months.
The benchmark closed nearly 4 per cent down in the previous session on a rallying US dollar and before an industry group said US crude inventories fell by 404,000 barrels last week. Analysts had expected a 4.4 million barrel build in stocks.
Brent for April delivery rose 21 cents to $56.60 a barrel by 0740 GMT after dropping $2.14, or 3.66 per cent, in the previous session.
West Texas Intermediate for April delivery climbed 51 cents to $48.80 a barrel after falling $1.71, or 3.42 per cent, on Tuesday.
“The sell-off was overdone,” said Jonathan Barratt, chief investment officer at Sydney’s Ayer’s Alliance.
“I think it was more of a knee-jerk reaction because of the substantial build (of oil stocks) at Cushing,” he said.
US crude inventories in the week to March 6 fell to 439.4 million barrels, while crude stocks at the Cushing, Oklahoma, delivery hub rose by 2.2 million barrels, data from industry group, the American Petroleum Institute (API), showed on Tuesday.
The US Department of Energy’s Energy Information Administration will release official stockpile data later on Wednesday. Analysts polled by Reuters expect a stock increase of 4.4 million barrels for the week ended March 6.
The fall in stocks was surprising, said Tony Nunan, oil risk manager at Tokyo's Mitsubishi Corp, partly attributing it to a decrease in imports and an increase in refinery crude runs.
He was bearish short-term on oil prices, which could drop close to January’s near six-year lows.
With the US dollar near to multi-year highs against a raft of currencies “oil has done very well to hold on. Brent is still trading through $55 a barrel”, Barratt said.
A strong dollar makes commodities priced and traded in the greenback, including oil, expensive for holders of other currencies.
Barratt said recent economic news had also been broadly encouraging and “if US crude doesn’t break below $48.50 again this is a great time to buy”.
Data due on Wednesday, including industrial output and retail sales in February in China, the world’s top energy consumer, could give further direction.
Reuters
