Oil futures posted a 1.7% gain Wednesday, avoiding a third-straight losing session on a range of factors that supported the market, including new data on crude inventories that rose only slightly more than expected.
Futures were up slightly in early trading but rose more strongly after the mid-morning release of the U.S. Energy Information Administration data, and extended gains through the rest of the day. Light, sweet crude for May delivery settled up $1.68 to $102.70 a barrel on the New York Mercantile Exchange. Brent crude on the ICE Futures Europe exchange reversed early losses and ended up 30 cents or 0.3% to $120.18 a barrel, after dipping below $120 a barrel Tuesday for the first time in nearly two months.
The Energy Information Administration said U.S. crude stocks rose 2.8 million barrels in the week ended April 6. Analysts surveyed by Dow Jones projected a 2.2 million-barrel growth in supplies. However, data released late Tuesday from the American Petroleum Institute, a private industry group, reflected a 6.6 million-barrel build, which had traders anticipating a potentially bearish turn in the market.
Though the official number was higher than expected, the increase was not as outsized as the API data suggested.
Other data in the report were also bullish for prices. Draws on refined motor gasoline supplies were 4.3 million barrels for the week, much larger than the 1.4 million decline that was expected. And imports of raw crude declined to 8.5 million barrels per day.
"It's more or less a bullish number when you think about that," said Carl Larry, president of advisory firm Oil Outlooks and Opinions. "We're seeing a lack of imports here."
A range of other factors also supported the market, from strife in Sudan that could disrupt oil supplies, to Fed Beige Book diagnosis of continued U.S. economic recovery and Iran reducing exports amid tensions with the West. Oil's gains were reinforced by appreciation in the equity markets, which were buoyed by strong results from Alcoa to kick off earnings season and an improvement in sovereign debt yields for Spain and Italy.
The market's gains arrested a slide in oil prices that has seen the front-month contract lose more than 7% since its recent high last month amid a drum-beat of negative news for the industry, including cooling tensions with Iran, weakening U.S. supply-demand fundamentals, talk among developed nations of a release from strategic reserves to tame prices and the possible end of Fed efforts to juice the economy through monetary policy.
"The selloff at least has subsided for now," said Tom Bentz, director of BNP Paribas Prime Brokerage.
Still, in the bigger picture other factors continue to weigh on the market, from renewed worries about European sovereign debt to a weak U.S. jobs recovery and an economic slowdown in China that would reduce oil demand in the world's second-largest-consuming nation. The Energy Information Administration on Tuesday reduced its forecast for U.S. and global oil demand in 2012.
In a research note, Barclays said Wednesday that it expects the benchmark U.S. oil contract, West Texas Intermediate, to be "depressed for years," as it reduced price forecasts for this year and the next three years. In its own note, advisory firm The Schork Report said: "The air that was injected into the market in February has been leaking out slowly."
Front-month May reformulated gasoline blendstock, or RBOB, settled up 4.59 cents at $3.2955 a gallon. May heating oil rose 1.92 cents to $3.1149 a gallon.