Oil prices surrendered most of their early gains on Wednesday, with U.S. crude turning negative, on worries that government data could show another big U.S. crude stock build despite supportive Canadian supply outages.
Brent and U.S. crude’s West Texas Intermediate (WTI) futures rose earlier as Shell announced a Nigerian pipeline closure while Canadian energy firms tried to restart closed facilities that had halted more than 1 million barrels per day (bpd) in supply after a huge wildfire in Alberta’s oil sands region.
In the previous session, Brent settled up 4 percent and WTI more than 2 percent on expectations that record U.S. crude inventories would not swell as much as they have in recent weeks.
That was before preliminary data from the American Petroleum Institute (API), an industry group, suggesting U.S. crude inventories rose by 3.45 million barrels to a record high of 543.1 million during the week ended May 6. Analysts polled by Reuters had expected a build of only 714,000-barrels. [API/S]
Traders and investors will be looking out at 10:30 a.m. EDT (1430 GMT) for official inventory data from the U.S. Energy Information Administration (EIA).
“Crude needs to start drawing soon or this market is in trouble,” said Scott Shelton, broker with ICAP in Durham, North Carolina.
He cited reduced supply out of Canada, which exports an estimated 3.5 million bpd of oil sands output to the United States, should be a driving force for reducing U.S. stockpiles.
“I would think that the draws are coming and the market is going to be willing to wait for it.”
Another broker concurred, noting that Canada’s oil sands production “looks to come back gradually as wild fires become controlled.”