US crude inventories rise unexpectedly on distillate, gasoline build

Brent crude, which is used to price worldwide oils, gained $1.17, or 3.2 percent, to close at $37.79 a barrel in London.

The American Petroleum Institute, an industry group, estimated that USA crude stocks grew by 2.9 million barrels last week, defying market expectations for a decline.

Forecasts that an upcoming cold weather in Europe will only be short-lived could also hurt crude prices. S. shale drillers have been very high but so far the demand was somewhat strong which stopped the oil prices from falling even lower.

“The oil prices in the next year (2016) will fluctuate between $35 to $50, so Iran is not anxious about a fall of its oil income”, Mehdi Asali said, Reuters reported.

“With Brent crude oil hovering near 11-year lows and WTI not faring all that much better, the markets are ending the year on a sombre note, consistent with what we see as ongoing physical oversupply”, said Tim Evans of Citi Futures.

United States heating oil, also known as Ultra Light Sulfur Diesel (ULSD), partly fed yesterday’s gains in crude, rising almost four per cent to above $1.13 a gallon. However, prices quickly turned south after the API data.

The presence or absence of export restrictions doesn’t affect the absolute level of WTI (West Texas Intermediate) or Brent prices in the context of low oil price cases.

US crude stocks rose unexpectedly last week on a bigger-than-expected build in distillate and gasoline inventories and higher imports, data from the Energy Information Administration showed on Wednesday.

Brent, the global benchmark, rose 3 cents, or 0.1%, to $36.49 a barrel on ICE Futures Europe.

“We continue to wait for USA production to fall”.

“Thursday’s price rise comes from short-covering and consolidation after the steep decline on Wednesday”, said Daniel Ang, an analyst with Phillip Futures in Singapore. The immediate outlook for oil prices remains bleak, with some analysts like Goldman Sachs saying prices as low as $20 per barrel might be necessary to push enough production out of business and allow a rebalancing of the market.

For example, in November, OPEC’s largest producer, Saudi Arabia, churned out 7 percent more crude oil than a year ago, offsetting a slip in US oil supply growth, he said.

In Australia, the benchmark S&P/ASX 200 was up 0.6% to 5,238.80 after reopening from public holiday on Monday.