(Bloomberg) -- Oil settled below $46 as rising U.S. production dampened the enthusiasm over declining crude and gasoline stockpiles.
Futures gained less than 1 percent in New York after jumping more than 3 percent in an initial reaction to the supply drop. While data from the Energy Information Administration showed U.S. crude inventories fell by 6.3 million barrels last week, and gasoline by 3.7 million, American production resumed its steady climb. Output has risen for all but six weeks this year, increasing by 88,000 barrels a day the last time around.
“We got a bit of a rally off the report. It was fairly bullish obviously, but a couple of things in the report also cut the other way, in particular the big rebound in domestic production,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund, said by telephone.
Oil has remained below $50 for the past six weeks, with skittish traders awaiting more consistency in the turnaround. Futures tumbled 4.1 percent Wednesday after Russia was said to oppose deepening OPEC-led production cuts.
“A larger-than-expected draw clearly is another data point that will help improve or turn the tide as far as sentiment is concerned,” said Rob Thummel, managing director at Tortoise Capital Advisors LLC, by telephone. “But it's not just going to take one.”
West Texas Intermediate for August delivery added 39 cents to settle at $45.52 on the New York Mercantile Exchange. Total volume traded was about 32 percent above the 100-day average. The contract lost $1.94 to close at $45.13 on Wednesday, snapping the longest run of gains this year.
See also: OPEC Compliance to Cuts Doubted on Output-Export Mismatch
Brent for September settlement climbed 32 cents to end the session at $48.11 a barrel on the London-based ICE Futures Europe exchange, after sliding 3.7 percent on Wednesday. The global benchmark crude traded at a premium of $2.41 to September WTI.
Crude stockpiles declined to 502.9 million barrels, their lowest since January. At Cushing, Oklahoma, the delivery point for WTI and the nation's biggest oil-storage hub, they shrank for a seventh week, falling by 1.3 million barrels to 59.5 million, the lowest since November, EIA data showed. Production rose to 9.3 million barrels a day.
As for gasoline, inventories slid to 237.3 million barrels and demand rose by 167,000 barrels a day to 9.71 million.
WTI is down by about 16 percent so far this year amid concerns that rising supplies from Libya to the U.S. will counter production cuts from the Organization of Petroleum Exporting Countries and its partners including Russia.
Morgan Stanley reduced its third-quarter and fourth-quarter WTI and Brent forecasts, saying OPEC's current output cuts aren't enough to support prices in the mid-$50s and U.S. shale needs to slow down if OPEC can't re-balance the market through supply curbs.
A big bearish bet was placed on the United States Oil Fund. About 148,552 lots of options to sell the shares at $8.5 in August traded as of 3:11 p.m. Thursday in New York, data compiled by Bloomberg show. The biggest exchange-traded fund tracking oil prices has declined 21 percent this year to $9.32.
“There's some real concern about oil from people who are speculating,” Eric Balchunas, an ETF analyst for Bloomberg Intelligence, said by telephone.
Oil-market news:
- OPEC shipments will decrease to 23.97 million barrels a day in the four weeks to July 22 versus the period to June 24, tanker-tracker Oil Movements says in weekly report.
- U.S. crude exports averaged about 1.02 million barrels a day in May versus about 1 million barrels a day in April, according to Bloomberg calculations of U.S. Census Bureau data released Thursday.
- Saudi Arabia cut August pricing for most of its crude grades to Asia as the world's largest oil exporter seeks to stay competitive.
--With assistance from Ben Sharples and Grant Smith
To contact the reporter on this story: Jessica Summers in New York at jsummers24@bloomberg.net.
To contact the editors responsible for this story: Reg Gale at rgale5@bloomberg.net, Carlos Caminada, Jim Efstathiou Jr.
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