Oil prices settled lower on Wednesday after traders and investors ignored an unexpected drawdown in U.S. crude stockpiles to focus on a build in distillates, including diesel, that came in twice more than expected.
Crude inventories across the United States fell 3.6 million barrels last week, the government's Energy Information Administration (EIA) said. It was the first stockpile drop after 10 straight weeks of builds, bucking a 300,000-barrel build forecast in a Reuters poll.
Futures of Brent and U.S. crude's West Texas Intermediate (WTI) were up more than $1 a barrel in an immediate reaction to the data, before turning negative later as the market's attention turned to the bearish distillate numbers.
The EIA said distillate inventories jumped by 5 million barrels, double the forecast and the sharpest rise since January, while demand for the fuels fell to its lowest level seasonally since 1998, according to the data.
"The large rise in distillate fuels will likely work to make the report bearish by day's end," said John Kilduff, partner at New York energy hedge fund Again Capital.