Oil slips as fuel inventories rise

A worker watches as a pice of drill pipe is lifted onto a drilling rig near Midland, Texas February 12, 2019.
Nick Oxford | Reuters

Oil futures steadied on Wednesday after U.S. government data showed a drawdown in domestic crude stocks but rises in refined product inventories, while lingering worries about the global economy weighed on the market.

Brent crude rose 0.42% to $60.28 a barrel, down from a session high of $61.41. U.S. West Texas Intermediate (WTI) crude settled down 0.8% to $55.71 a barrel, after hitting $57.13 a barrel.

Prices pared gains after data from the Energy Information Administration showed bigger-than-expected builds in U.S. fuel inventories last week. Gasoline stocks rose by 312,000 barrels, while distillate supplies grew by 2.6 million barrels.

Crude stockpiles decreased 2.7 million barrels, a bigger drawdown than the 1.9 million barrels that analysts had forecast.

"It looks like gasoline demand has peaked for the season, and will only trend lower from here," said John Kilduff, partner at energy hedge fund Again Capital Management in New York.

Tensions between the United States and Iran remained in focus. Iranian President Hassan Rouhani said that if Iran's oil exports are cut to zero, international waterways would not have the same security as before, cautioning Washington against tightening pressure on Tehran.

The comment coincided with a remark by Iranian Foreign Minister Mohammad Javad Zarif that Tehran might act "unpredictably" in response to U.S. policies under President Donald Trump.

Uncertainty over the global economic outlook amid the U.S.-China trade war capped gains in the oil markets.

"Crude oil remains stuck, with the relief rally in recent days not removing the fear that recession risks could still send the market lower again," said Ole Hansen, head of commodity strategy at Saxo Bank.

Traders were also watching this week's annual U.S. central bank seminar in Jackson Hole, Wyoming, where comments from Federal Reserve Chief Jerome Powell will be in focus.

"Market players continued to fret over recession fears and sluggish oil demand forecasts," said Stephen Brennock of oil broker PVM. "A reprieve, however, may be on the cards tomorrow ... expectations are running high that hints of impending monetary stimulus will be plentiful."