Oil prices fell on Wednesday as a big rise in US crude inventories and the prospect the United States and some European nations might tap strategic reserves sent futures into retreat. US crude stocks rose by 7.1 million barrels last week, the Energy Information Administration said, more than forecast.
Gasoline inventories declined by a more-than-expected 3.54 million barrels and distillate stocks fell 700,000 barrels. "It's a battle of the headlines that makes for a mostly bearish report," said John Kilduff, a partner at Again Capital LLC. "The large gain in crude oil inventories is countered by the large decline in motor gasoline, but the sizable uptick in the refinery utilisation argues for more product increases in coming reports," Kilduff added.
Ahead of the inventory data, the prospect of a release of strategic oil reserves from the United States and some European nations pressured oil. France is in contact with Britain and the United States on a possible release of strategic oil stocks to push fuel prices down, Le Monde daily said, citing presidential sources. A release of strategic oil stocks "is a matter of weeks", the French newspaper said.
Brent crude fell $1.38 to settle at $124.16 a barrel, having dropped to $123.53 intraday, testing below the 30-day average of $123.87. US crude slipped by $1.92 to settle at $105.41 a barrel, below the 30-day average of $106.32 and having fallen as low as $104.67.
Even with the day's losses, Brent was on pace to post a 15 percent rise for the quarter, with US crude up more than 6 percent. Brent's premium to US crude increased slightly to $18.75 based on settlements, having edged above $19 a barrel intraday. Trading volumes exceeded half a million lots for both Brent and US crude, and Brent neared its 30-day average. US dealings were 17 percent below the 30-day average.
Worries about the health of the US economy also helped keep oil prices pressured. New orders for US durable factory goods rose less than expected in February and a gauge of future business investment also fell short of forecasts.
Traders and analysts said some additional pressure on commodities may have come from Goldman Sachs saying it was shifting its recommendation on commodities to "neutral" from "overweight" on a near-term horizon, as most commodity markets including copper, crude oil and soybeans have reached the brokerage's near-term targets. The 19-commodity Thomson Reuters-Jefferies CRB index fell 1.26 percent. Rising tensions between Iran and the West over Tehran's nuclear program have kept oil prices elevated this year, with additional support provided recently from production problems in the North Sea and reported attacks on oil-producing areas in South Sudan.
Iran expects to reopen talks with world powers on April 13 in an effort to defuse increasing tensions, Iranian Foreign Minister Ali Akbar Salehi said. Traders have been monitoring the possibility of a strategic oil reserves release since prices began rising on the implications of European Union sanctions on Iran's oil exports, slated to be implemented in July. Saudi Oil Minister Ali al-Naimi blasted "irrationally" high oil prices in an opinion piece in the Financial Times, but offered no sign that the kingdom was moving to boost output.
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