Nymex crude futures Wednesday overlooked bearish elements in a U.S. oil inventory report and the lack of concrete news on Federal Reserve stimulus to finish the day firmly in positive territory.
Light, sweet crude for August delivery settled at $85.81 a barrel on the New York Mercantile Exchange, up $1.90 or 2.3%. Front-month Brent crude gained $2.26 per barrel to close at $100.23.
Nymex crude traded in the green throughout the day Wednesday, but there were several lurches up and down during the session. The commodity initially gave up gains following the 10:30 a.m. U.S. oil inventory report, but rallied soon after. Oil took a similar retreat after the U.S. Federal Reserve minutes were released, but then closed the day impressively.
The market is "certainly shaking of a lot of bearish factors," said Again Capital trader John Kilduff.
At a base, Mr. Kilduff added, the oil market is concerned about tightness in the Brent market due to a recent oilfield strike in Norway and ongoing concerns about Iranian oil production. A report released Wednesday by the Organization of Petroleum Exporting Countries said Iranian output in June fell further.
According to data OPEC analysts gathered from secondary sources, these restrictions drove Iran's oil production down by 188,500 barrels a day in June, to 2.96 million barrels a day. The last time Iran's annual average production fell below 3 million barrels a day was 1990.
"There's obviously a structural strength here with the market," said Mr. Kilduff, who noted that the equity market and several other commodities were trading lower Wednesday.
Nymex crude opened the day higher after a big selloff at the end of Tuesday's session. But oil gave up many of the gains after the U.S. oil inventory report was released at 10:30 a.m.
The report showed that U.S. oil inventories dropped by 4.7 million barrels, well above the 1.1 million draw that had been anticipated by analysts.
Despite that bullish indicator, it was the gasoline and distillate numbers that caught traders' attention. The EIA reported gasoline inventories rose by 2.76 million barrels compared with analyst expectations of a 300,000-barrel draw. And in another bearish tilt, U.S. distillate stocks rose by 3.1 million compared with an expected draw of 100,000 barrels.
Analyst Stephen Schork characterized the inventory report as "pretty bearish," in part because of the increases in the refined product inventory and in part because it pointed to a drop in gasoline demand during the Independence Day holiday, normally a busy period for motorists.
Wednesday afternoon, the Federal Reserve released minutes that pointed to debate on whether to enact a new round of stimulus, but no concrete plan for doing so. Previous rounds of quantitative easing have helped bolster the oil price thanks to the weakening impact they have on the dollar.
Some analysts pointed to the lack of concrete movement towards easing in the notes. But some economists said the minutes show Fed officials warming to the idea of more action.
Front-month reformulated gasoline blendstock, or RBOB, settled at $2.77 a gallon, up 2.2 cents. Front-month heating oil settled at $2.76 a gallon, up 4.2 cents.