Oil prices ease as U.S. gasoline demand soars
NEW YORK Oil futures fell from fresh four-month highs in choppy trading on Wednesday as comments from Russia’s energy minister added to doubts a producer meeting set for Sunday in Doha to discuss freezing output would yield a positive outcome.
Prices fell after Reuters reported that Russian oil minister Alexander Novak told a closed-door briefing that a deal on an oil output freeze scheduled to be signed this month in Doha will be loosely framed with few detailed commitments.
The prospect of a combined OPEC and non-OPEC deal to prop up prices has boosted oil in recent weeks but analysts said that even if a deal is struck, it will do little to restore supply/demand balance.
“We have muted expectations for any meaningful impact on crude fundamentals from the April 17th Doha meeting,” Macquarie Capital analysts wrote in a note.
“We do not believe that anyone is going to cut production to get back into compliance with January levels.”
Brent crude LCOc1 was down 42 cents at $44.27 per barrel by 12:42 p.m. EDT (1642 GMT), while U.S. crude CLc1 fell 35 cents to $41.82.
The news from Moscow came as data showed a bumper build in U.S. crude stocks last week. U.S. crude inventories rose 6.6 million barrels to 536.53 million barrels, the Energy Information Administration said on Wednesday, compared with analyst expectations for a 1.9 million-barrel rise. [EIA/S]
A larger-than-expected draw in gasoline inventories and falling U.S. crude production softened the blow of soaring crude stocks. Gasoline fell by 4.2 million barrels to 239.76 million, compared with an analyst forecast for a 1.4 million-barrel draw.
“Ultimately, the downside based upon inventory figures is limited because of two factors: the strong gasoline demand and falling U.S. crude production,” said Anthony Headrick, energy market analyst at CHS Hedging.
Prices came under pressure earlier in the session, falling more than 2 percent after comments by Saudi Oil Minister Ali al-Naimi in the al-Hayat newspaper that confirmed his country’s position that an outright production cut was out of the question.
“Forget about this topic,” al-Naimi told the newspaper when asked about any possible reduction in Saudi crude output.
Iranian Oil Minister Bijan Zanganeh does not plan to attend the Doha meeting, but Iran will send a representative, an Iranian journalist from the Seda weekly wrote on Twitter on Wednesday.
Iran has said it does not plan to participate in the freeze agreement as it seeks to boost its production in the post-sanctions era.
Morgan Stanley analysts said the market may still be underestimating the potential near-term headline upside risk of the Sunday meeting.
(Additional reporting by Ahmad Ghaddar in London, Keith Wallis and Henning Gloystein in Singapore; Editing by Jonathan Oatis and Meredith Mazzilli)