Oil edged higher on Wednesday as Wall Street equities rebounded from early losses to trade flat, and Brent crude futures premium over West Texas Intermediate crude briefly above $20.00 a barrel due to an unexpected rise in US crude oil inventories.
Oil's gains were modest, and sentiment was dented earlier in the day after Germany denied the euro was overvalued. "I think what we've got here is a situation once again where crude oil is going to be backed up, because we'll be producing more than we're refining," said Phil Flynn, analyst at Price Futures Group in Chicago, after the release of weekly inventory numbers that showed high levels of US crude.
"At the moment, we continue to follow the financials. The market seems very sensitive to the economic factors and they remain the primary driver," said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut. The European Central Bank is expected to keep interest rates at a record low of 0.75 percent when it meets on Thursday, but the focus will be on whether policymakers are worried a strong euro could hurt recovery in troubled economies such as Spain.
Brent crude futures edged up on Wednesday, increasing their premium to US crude, while gains were curbed by data showing rising inventories in the United States. Brent March crude rose 21 cents, or 0.18 percent, to settle at $116.73 a barrel, having traded from $115.72 to $117.05.
Gains were not enough to match the previous day's session high, the highest point since mid-September. US crude futures edged lower on Wednesday in choppy trading, as a government report showing crude oil inventories rose in the United States last week applied pressure to oil prices. US March crude fell 2 cents, or 0.02 percent, to settle at $96.62 a barrel, having traded from $95.04 to $96.99. It early trade it rose 25 cents to $96.88.
US crude stocks were up 2.62 million barrels last week, according to the Energy Information Administration's (EIA) weekly inventory report. Gasoline stocks rose 1.74 million barrels and distillate stocks were off 1.04 million barrels, the EIA said. "It is definitely a negative report and bearish for crude oil as supplies continue to go higher," said Flynn.
Saudi Arabia, the world's largest oil exporter, kept crude oil production steady at 9.05 million barrels per day (bpd) in January, from 9.025 million bpd in December, an industry source said. Economic data released this week suggested the euro zone economy had turned a corner, with strong Markit Eurozone Composite PMI data, based on business activity. But worries persisted about political conflict in Italy and Spain. Investors will watch for the ECB's meeting on Thursday and China's trade numbers on Friday for more clues on the health of the global economy and what it may mean for commodities demand.
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