By Barani Krishnan
Investing.com - There's probably more OPEC oil already landing in the United States, regardless what the Saudis say, and the hedge funds may soon wise up to drive prices lower again.
Oil prices slid on Wednesday after the U.S. Energy Information Administration reported that crude stockpiles in the country rose about five times more than expected last week. Imports grew the most since mid-March amid new momentum in the market's four-month long rally.
New York-traded West Texas Intermediate crude settled down 41 cents, or 0.6%, at $65.89 per barrel.
London-traded Brent, the global crude benchmark, was down for most of the day, but rallied toward the close and settled at $74.57, up 6 cents.
The EIA said crude inventories rose by 5.48 million barrels in the week ended April 19, compared with forecasts for a build of 1.26 million barrels. In the previous week to April 12, crude stockpiles fell by 1.4 million barrels.
Gasoline inventories decreased by 2.13 million barrels, compared to expectations for a draw of 1.04 million barrels. Distillate stockpiles dropped by just 660,000 barrels, compared to forecasts for a decline of 1.16 million.
Despite Wednesday’s price declines, WTI was still on track for a possible gain of 3% on the week, while Brent is up nearly 4%. Year to date, the U.S. benchmark is up 45% and its U.K. peer has gained 38.6%. The U.S. national average retail price of gasoline was at $2.866 a gallon, according to AAA's Daily Fuel Gauge Report, up from $2.849 on Tuesday. The price is up 26.5% this year.
The advances came as the U.S. said on Monday it would scrap all sanction waivers for importers of Iranian oil after May 2, heightening concerns about supply in a market already hyped up about the scarcity of barrels after nearly five months of OPEC production cuts on top of unplanned outages in Venezuela and Libya.
Saudi Energy Minister Khalid al-Falih added to the fear quotient on Wednesday by saying the kingdom had no intention of ramping up production preemptively to offset the impact of lost Iranian barrels.
Any increase would have to be need-based, coming directly from buyers, Falih added.
While the Saudi posturing was tough, data on weekly oil imports into the U.S. seemed to tell a different story.
U.S. crude imports rose by 1.2 million barrels per day last week, the most in three weeks, Wednesday's EIA report showed. While a breakdown on where that oil came from will not be available until next week, the report suggested that OPEC was already increasing production and exports to lock in this year's runaway rally in oil.
"There's certainly more OPEC oil coming into the U.S., if not the world, and it's not surprising at these sort of prices," said John Kilduff, founding partner at New York energy hedge fund Again Capital.
"The Saudis want to produce more, but they don't want to talk about it, of course, preferring to keep the chatter to market stability and production hikes on a need-to basis," Kilduff said. "Anything else could send the wrong message to the market: that we're heading again for an oversupplied situation."
"The Saudis' speeches are particularly aimed at hedge funds because that's the community you want to keep in a state of lull if you want to preserve these sort of prices," he added.