A comeback rally in oil paused on Wednesday as traders took stock of the blistering 35 percent gain in crude prices since late January despite mounting US supplies The closure of Chinese markets through the weekend for the Lunar New Year added to the quieter trade in both benchmark Brent and US crude, with volumes less than half of Tuesday levels, Reuters data showed. Singapore, another major trading center for crude, will observe the celebration from Thursday.
UK-traded Brent and crude futures in New York were both down about 3 percent on Wednesday afternoon as traders awaited supply estimates due at 4:30 pm ET (2130 GMT) from industry group American Petroleum Institute that could show a build of over 3 million barrels of crude last week. Official supply-demand in US crude for the week ended February 13 will be released by the government on Thursday. Stocks rose nearly 5 million barrels in the prior week, taking total crude inventories to a record high of nearly 418 million barrels.
"We have more supply coming from here with the refinery maintenance season in swing, and that's prompting some people at least to ask if the market has overstretched itself with the rebound," said Tariq Zahir, managing member at Tyche Capital Advisors in Laurel Hollow in New York.
Brent was down $1.80, or 2.9 percent, at $60.73 a barrel by 1:25 pm ET (1825 GMT). It had hit a 2015 high of $63 on Tuesday, up 35 percent from a near six-year low of $45.19 on January 13. US crude fell $1.42, or 2.7 percent, to $52.11. The rebound in oil came after extensive short-covering in recent weeks by traders fearing the market had hit bottom after a 60 percent price crash since June. Violence in Iraq and Libya, both important oil producers, added fuel to the rally.