U.S. crude oil futures ended higher in a late rebound as products clambered from their session lows despite a surprising rise in distillate supplies and a larger-than-expected gain in gasoline stocks.
Some traders said a test of the day's lows failed and investors, including funds, came in and the energy markets regained their footing.
"I think the market shook off the gasoline number since we are not in driving season anyway," said Phil Flynn, analyst at Alaron Trading in Chicago.
"The drop in refinery runs should be supportive as it will keep heating oil tight and probably cut into gasoline," he added.
On the New York Mercantile Exchange, March crude settled down 33 cents higher at $55.37 a barrel, well above the early morning low of $53.66. It posted the day's high near the close at $55.45.
Crude futures had risen more than 4% to above $55 on Tuesday after the U.S. announced it planned to expand the nation's Strategic Petroleum Reserves and amid a cold snap through most of the nation.
Just last week, prices were down, to $49.90, the lowest since May 2005. But the situation changed quickly after colder winter weather hit the U.S. Northeast, the biggest regional user of heating oil.
For the week ended Jan. 19, domestic distillate supplies rose 700,000 barrels to 142.6 million barrels, according to the U.S. Energy Information Administration, the statistical arm of
the Department of Energy.
That went counter to forecasts in a Reuters poll of analysts for a decline of 800,000 barrels.
However, among distillate products, heating oil stocks dropped 1.5 million barrels to 58.8 million barrels. A rise in diesel fuel inventories more than compensated for that decline.
Despite the stock increase, demand for distillates rose for the week to 4.1 million barrels per day from 3.98 million bpd the week before, apparently on deliveries to distributors amid a cold snap in the U.S. Northeast.
Distillate production fell about 100,000 bpd to 3.9 million bpd, while imports rose to 436,000 bpd from 277,000 bpd the week before.
Crude stocks rose 700,000 barrels to 322.2 million barrels, below forecasts for a 1.1 million increase.
Stocks were up as refinery runs decreased 0.5 percentage point to 87.4% of capacity, near expectations for an 0.4 percentage point decline.
Crude imports fell back 1.25 million bpd to 9.8 million bpd.
Gasoline stocks rose by a heftier-than-expected 4.0 million barrels to 220.8 million barrels. Forecasts had called for a 1.3 million barrel rise.
Demand for the motor fuel dropped to 9.1 million bpd from 9.2 million in the prior week. Production was flat while imports fell slightly to 911,000 bpd.
Traders said heating oil's losses may be limited by the colder weather that has hit across the U.S., and especially in the Northeast.
Heating load in the region will average either near or above normal during the next five days, private forecaster DTN Meteorlogix predicted Wednesday.
The six- to 10-day DTN Meteorlogix forecast called for temperatures to average below normal.
NYMEX March crude resistance gave way at $55.25, with the next spot-chart high is $55.81, which was hit on Jan. 10. Support lies at $52.
Heating oil resistance was pegged at $1.60, which is just under the Jan. 8 high of $1.601. Support was charted at $1.50.
RBOB's resistance was pegged at $1.50 with support at $1.40.