Crude oil rebounded on Wednesday on a sharp decline in US gasoline stocks, but persistent worries about economic growth curbed gains. Prices rose in early trade to near two-week highs, lifted by initial gains on Wall Street and a late Tuesday report by American Petroleum Institute showing a steep drop in domestic gasoline inventories last week.
Later, the market pared gains when the US Energy Information Administration confirmed the gasoline drawdown. EIA data also showed a steep build in crude stockpiles, capping the day's rally. A downturn on US equities in New York also weighed on prices, as sentiment wavered after pushing higher on strong earnings. Worries about the euro zone debt crisis and mixed US economic data have kept investors cautious for much of August.
In London, ICE Brent for October delivery settled $1.47 higher at $110.60 a barrel, having traded as high as $111.74, the steepest hike since August 4. It slipped to $98.74 on August 9, the lowest since February, on concern about an economic slowdown.
US crude for September delivery closed at $87.58, gaining 93 cents, after pushing to a session high of $89, also the highest since August 4. Brent's premium against the US October crude contract closed at $22.87, widening from $22.29 on Tuesday. The WTI/Brent spread hit a record $26.08 on August 9. "The Brent market re-established an upside leadership role today with the October contract making its debut as spot month," said Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois.
Saudi Arabia produced 9.8 million bpd in June, rising more than 900,000 from May, while exports rose to their highest level since the financial crisis hit demand in 2008, data from the Joint Data Initiative showed. Improved risk sentiment pushed the Relative Strength Index of US crude to 43.96 percent, after dipping to 41.25 on Tuesday. Recent buying has lifted the index from the 20.16 low hit on August 9, well below the 30 level that signifies oversold conditions.
In London, ICE Brent's RSI also improved to more than 48, from 44.38 on Tuesday. US gasoline stockpiles shrank 3.5 million barrels last week, data from the US Information Administration showed. The drawdown was more than the forecast for a 1.3 million barrel drawdown in a Reuters poll.
That overshadowed an unexpected 4.2 million barrel rise in US commercial crude oil inventories, which was against the forecast for a drawdown of 800,000 barrels. However, stocks the key Cushing, Oklahoma, delivery hub fell nearly 900,000 barrels to 33.7 million barrels, their lowest level since mid-November. Commercial crude stocks rose as the US government continued releasing supplies from the Strategic Petroleum Reserve, part of a co-ordinated effort with members of the International Energy Agency to cover barrels lost due to fighting in Libya.
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