Oil prices end lower, with weekly U.S. crude supply up over 3 million barrels

By Myra P. Saefong and William Watts

EIA reports a smaller weekly rise in crude stockpiles than the API

Oil futures declined on Wednesday but settled off the session's lows after official U.S. data revealed a weekly increase in commercial crude inventories that was smaller than what was reported by an industry trade group.

Price moves

West Texas Intermediate crude CL00 for May delivery CL.1 CLK24 fell 27 cents, or 0.3%, to settle at $81.35 a barrel on the New York Mercantile Exchange after trading as low as $80.55.May Brent crude BRNK24, the global benchmark, edged down by 16 cents, or 0.2%, to settle at $86.09 a barrel on ICE Futures Europe. June Brent BRN00 BRNM24, the most actively traded contract, declined 22 cents, or 0.3%, to $85.41 a barrel.April gasoline RBJ24 shed 0.6% to $2.68 a gallon, while April heating oil HOJ24 declined by 0.9% to $2.60 a gallon.Natural gas for May delivery NGK24 ended at $1.72 per million British thermal units, down 3.9%.

Oil prices on Wednesday settled modestly lower, but given the holiday-shortened week and the upcoming end to the first quarter, Tariq Zahir, managing member at Tyche Capital Advisors, said a "little weakness in the energy complex" isn't surprising.

Oil trading on Nymex and ICE Futures Europe will be closed March 29 for Good Friday.

Read: Is the stock market open on Good Friday?

Still, the weakness in oil prices is likely to be short-lived, said Zahir.

"With the upcoming summer driving season right around the corner and the instability still with us in the Middle East, along with the extension of supply cuts by OPEC, we do expect the energy complex to resume the upward trend we have seen in the past few weeks," he told MarketWatch.

Read: Oil could trade near $100 this year. Here's what could drag prices back down.

Supply data

U.S. commercial crude inventories posted their first climb in three weeks, with the Energy Information Administration on Wednesday reporting a climb of 3.2 million barrels for the week that ended March 22.

"Despite a tick higher in refinery runs, import strength has helped encourage a crude [supply] build," said Matt Smith, head U.S. analyst at Kpler.

This week's crude build puts the U.S. back to a build so far in March, albeit a narrow one, with one week to go. Aside from an anomaly last year amid record crude exports, U.S. crude inventories have shown a build during every March since the start of this century.

On average, analysts forecast a decline of 2 million barrels, according to a poll conducted by S&P Global Commodity Insights. Late Tuesday, the American Petroleum Institute reported a crude inventory climb of 9.3 million barrels, according to a source citing the data.

The EIA report also showed a weekly supply increase of 1.3 million barrels for gasoline, while distillate stockpiles edged down by 1.2 million barrels. The S&P Global Commodity Insights survey had forecast decreases of 1.7 million barrels for gasoline and 300,000 barrels for distillates.

U.S. distillate fuel oil demand has been "extremely weak" so far this year, but today's report showed that product supplied, a proxy for demand, pushed higher, said Troy Vincent, senior market analyst at DTN. "This could be a bullish catalyst moving through the spring if U.S. diesel demand begins to finally firm up."

U.S. oil production was unchanged in the latest week at 13.1 million barrels a day, the EIA said, while crude stocks at the Cushing, Okla., Nymex delivery hub were up by 2.1 million barrels to 33.5 million barrels.

First-quarter gains

So far in the first quarter, oil prices are trading higher, with WTI, based on the front-month contract, up almost 14% and Brent up nearly 12%, according to Dow Jones Market Data.

Oil has rallied in the first three months of the year, "albeit not in a clean trend," Fawad Razaqzada, market analyst at City Index and Forex.com, said in emailed commentary.

Geopolitical uncertainty related to Ukraine and the Middle East and extended supply cutbacks by the Organization of the Petroleum Exporting Countries and their allies have helped to support oil prices, he said. "These factors have outweighed prior concerns about a challenging economic situation in China and non-OPEC supply growth."

However, concerns over China have "eased somewhat following the government's ambitious 5% growth target announcement and improvement in economic data," Razaqzada said.

So oil prices have remained "supported on the dips," and some major banks, including J.P. Morgan, are now forecasting even higher prices, Razaqzada said.

-Myra P. Saefong -William Watts

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03-27-24 1526ET

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