Oil rises nearly 2% to 3-month high, despite surprise inventory build

An aerial drone view of a crude oil storage facility on April 23, 2020 in Cushing, Oklahoma.
Tom Pennington | Getty Images

Oil recovered its earlier losses on Wednesday, even as U.S. data showed crude inventories rose to a record high, reviving worries of a persistent glut due to weak demand.

Crude stocks rose by 5.7 million barrels in the week to June 5 to 538.1 million barrels, according to a U.S. Energy Information Administration report.

"As with the broader economy we are seeing a rebound but not one that puts us where we were a year ago," said Matt Smith, director of commodity research at Clipper Data.

Brent crude rose 34 cents to $41.52 a barrel. West Texas Intermediate gained 66 cents, or 1.7%, to settle at $39.60 per barrel after falling more than 2% in the session.

The U.S. Energy Department said on Wednesday that it had purchased 126,000 barrels of crude for the U.S. strategic reserve, supporting prices.

The inventory build exceeded analysts' expectations and was built on the third consecutive week of big imports from Saudi Arabia, which came to more than 1.5 million bpd. During a price war between Saudi Arabia and Russia in March and April, the kingdom boosted exports.

Brent has more than doubled since falling to a 21-year low below $16 in April, but some analysts think prices have risen too far with the pandemic still cutting demand.

"The macro factor that has supported the energy complex for more than a month could subside significantly as the strong advance in the equities is beginning to appear overcooked," Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois, said in a report.

Prices have been supported as the Organization of the Petroleum Exporting Countries (OPEC), Russia and others, a group known as OPEC+, slashed oil supplies by 9.7 million barrels per day (bpd), about 10% of pre-pandemic demand. OPEC+ agreed on Saturday to extend the record supply cut for another month until the end of July.