Oil prices fell by around 1 percent on Wednesday after data showed a huge increase in gasoline stockpiles in the United States last week, while disappointing euro zone and US economic figures hurt sentiment about energy demand. An increase in production by US refiners helped boost gasoline inventories by the biggest weekly margin since September 2001, the Energy Information Administration said, with stocks rising by 7.9 million barrels.
While US crude oil inventories fell more than forecast, distillate stocks - which include diesel and heating oil - rose by more than 3 million barrels. "The report is solidly bearish and a welcomed development for consumers," said John Kilduff, partner at Again Capital in New York. "The spike in gasoline inventories clears any of the remaining concerns about supplies from Hurricane Sandy."
Brent January crude lost $1.03 to settle at $108.81 a barrel, having fallen as low as $108.65. The session peak of $110.57 was a penny below the 50-day moving average. US January crude closed down 62 cents at $87.88 a barrel, having swung from $87.46 to $89.05. US gasoline futures fell almost 2 percent to just below $2.64 a gallon, while heating oil was down 0.4 percent to near $2.99 a gallon.
Crude oil prices took some support from a bounce back into positive territory by stocks on Wall Street, turmoil in the Middle East, and a remark by US President Barack Obama to business leaders that a budget deal was possible within about a week if Republicans compromise on taxes. "It's a stalemate. There was some hopeful data from the US last week and positive noise from China (this week), but Europe's a big worry," said Richard Langkemper, an analyst at Argos North Sea Group in Rotterdam. The US government's monthly report on nonfarm payrolls is due on Friday.
Brent crude prices have been underpinned in recent months by Western sanctions targeting Iran's oil exports and widespread turmoil in the Middle East, which traders and analysts fear could spill into key producing countries in the region. Unrest in the Middle East has partly overshadowed rapid increases in US domestic oil production in the short term, even as the world's largest oil consumer targets a move toward energy independence by the end of this decade.
US oil and gas production over the next two decades will be higher than previously expected, the US EIA said. In its annual energy outlook, the EIA said US oil production would hit a peak of 7.5 million barrels per day in 2019 before falling to 6.1 million bpd by 2040. It had previously forecast a peak of 6.7 million bpd in 2020. "The growth results largely from a significant increase in onshore crude oil production, particularly from shale and other tight formations," the agency said. Offshore crude oil output will also creep higher as deepwater and ultra-deepwater portions of the Gulf of Mexico are brought into production. "After about 2020, production begins declining gradually ... as producers develop sweet spots first and then move to less productive or less profitable drilling areas," the EIA said.
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