(Reuters) – Crude oil futures fell on Wednesday, unable to build on more than 1 percent gains in the previous session as rising inventories continue to curb rallies.
Industry spending cutbacks and falling U.S. rig counts helped fuel Brent crude’s price rebound from an almost six-year low of $45.19 in January, but U.S. data has continued to show rising oil inventories.
Export interruption in Libya has given a lift to Brent and helped boost its premium to U.S. crude CL-LCO1=R above $8 a barrel.
Attempts by Islamic State militants to capture Iraqi oil facilities has forced traders “to price in some geopolitical risk premium related to the increased turmoil spreading across the … region,” Jim Ritterbusch, president at Ritterbusch & Associates, said in a research note.
Front-month Brent April crude futures LCOc1 were down $1.28 at $61.25 at 11:11 a.m. EST, having fallen to $60.81 intraday.
U.S. March crude CLc1 was down $1.06 at $52.47 a barrel, having recovered from its $51.91 low. The March contract expires on Friday.
Volumes were significantly reduced in early trading as several Asian countries started the Lunar New Year holidays.
BNP Paribas told clients the recent surge in prices was premature given record-high U.S. crude stocks.
“U.S. refinery outages, through seasonal maintenance and industrial action, will weaken U.S. crude demand, exacerbating the crude stock excess in the near term,” oil strategists Gareth Lewis-Davies and Harry Tchilinguirian said in a note to traders.
U.S. commercial crude inventories are already at their highest since the Energy Information Administration began tracking weekly data and are expected to have risen again last week by 3.1 million barrels, a preliminary Reuters survey showed on Tuesday. [EIA/S]
Data from industry group the American Petroleum Institute is due at 4:30 p.m. EST on Wednesday, with the government’s report set to arrive on Thursday at 10:30 a.m. EST.
“Brent prices have benefited a bit from Libyan and Iraqi pessimism, but if stocks continue to amass, particularly Libyan problems will weigh light,” Samuel Ciszuk, senior adviser on security of supply to the Swedish Energy Agency, told the Reuters Global Oil Forum.
“People are getting used to Libyan exports being treated as a bonus,” he added.
Libya’s oil exports have collapsed to less than 200,000 barrels per day (bpd), from 1.6 million bpd before the 2011 civil war, hit by violence that has shut all the country’s major ports.