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Oil hits 2016 highs, pares gains on US oil inventory data
[NEW YORK] Crude futures rose for a third consecutive day on Wednesday, hitting 2016 highs above US$50 a barrel on supply outages led by the sabotage of oil facilities in Nigeria, before paring gains as glut concerns resurfaced after US data showed a surprise build in gasoline supplies.
US crude stocks fell for the third consecutive week to June 3, sliding by 3.2 million barrels versus analysts'expectations for a 2.7 million-barrel drawdown, government data showed.
But gasoline stockpiles grew by 1 million barrels and distillates, which include diesel and heating oil, rose 1.8 million barrels, versus forecasts of drawdowns.
This indicates a sentiment that gasoline demand will weaken more than expected or that the crude glut will be reflected by a gasoline glut, said Troy Vincent, crude oil analyst for New York-headquartered energy data provider ClipperData.
Brent crude was up 76 cents at US$52.20 a barrel by 11:58 am EDT (1558 GMT), after hitting US$52.54 earlier in the session, its highest since October.
US crude futures were up 65 cents at US$51.01 a barrel, rallying earlier to US$51.27, the highest level since July.
"The gasoline build was a big surprise, specially since the driving season is underway," said Tariq Zahir, managing partner at Tyche Capital Advisors in New York which specializes in long-dated spread trades in US crude futures.
"While we are witnessing a momentum trade in spot crude helped by the weakness in the dollar, the forward curve remains in contango with the build in the product markets. This, in our opinion, should limit the gains in spot prices," Mr Zahir said.
Oil hit the year's highs after the Niger Delta Avengers militant group said it had blown up a Chevron oil well in Nigeria, rejecting peace talks with the government. The Avengers have brought oil output in Nigeria, once Africa's largest crude producer, to a 20-year low.
Prices were also supported by data showing China's crude oil imports in May hit their highest in more than six years.
The dollar's drop to five-week lows on waning expectations for an imminent US rate hike had added to interest in greenback-denominated oil from holders of the euro and other currencies.
Despite the retreat in crude prices, some analysts said the overall upward momentum in oil was hard to ignore. Crude futures have nearly doubled in value from the 13-year low of US$27 for Brent and US$26 for WTI this winter.
"The trend is your friend and picking tops can be painful as all of the money out there chasing trends from the systematic side of the market can overwhelm," said Scott Shelton, broker at ICAP in Durham, North Carolina.