Brent up on more Yemen bombing; U.S. crude dips after stock build
Oil prices diverged on Wednesday with Brent closing up on renewed fighting in Yemen while U.S. crude fell after another weekly rise in inventories despite slower production.
Futures of U.K. North Sea Brent, the more globally used benchmark for crude, settled up 1 percent as warplanes from a Saudi-led coalition bombed Yemen a day after Riyadh said it was ending air strikes against Iranian-allied Houthi rebels there.
In New York, U.S. crude futures closed nearly 1 percent lower after reeling between negative and positive territory as players weighed government data that showed production declines versus higher stockpiles.
Oil rallied hard and fast in the first two weeks of April on worries about fallout from the fighting in Yemen, which sits beside shipping lanes for Middle East crude. Signs that U.S. oil production may be declining after months of increases added to gains.
But with global demand for oil lagging output, the run-up fizzled this week, although Brent remains up 14 percent on the month. U.S. crude has risen more, gaining 18 percent since the end of March.
On Wednesday, Brent settled up 65 cents at $62.73 a barrel after the White House said the situation in Yemen remained unstable and more work needed to be done in the region.
U.S. crude ended down 45 cents at $56.16 a barrel.
U.S. crude initially rebounded from the session low after the government-run Energy Information Administration (EIA) reported a drop of 18,000 barrels per day (bpd) in output last week, the second straight week of lower production.
“It’s another decline in production and the market is certainly anxiously awaiting more of those, at least people who are on the long side,” said Dominick Chirichella, senior partner at New York’s Energy Management Institute.
But the EIA also said U.S. crude stockpiles rose by 5.3 million barrels last week, higher than the 2.9 million-barrel build expected by analysts in a Reuters survey, reaching a record 489 million barrels.
Stocks at the key delivery point of Cushing, Oklahoma, rose by 789,000 barrels. Energy markets intelligence firm Genscape said tanks at Cushing were nearly 80 percent full.
The inventory build caused U.S. crude prices to seesaw between a gain of 58 cents and loss of 88 cents, “making it “difficult for people on both the long and short side”, said Tariq Zahir, an oil bear at Tyche Capital Advisors in Laurel Hollow, New York.