By Kim Khan
Investing.com - Stockpiles of U.S. crude saw an unexpected drop last week, the Energy Information Administration reported Wednesday, greatly easing worries about a storage shortage in the U.S.
But enthusiasm was short-lived as oil prices returned to the red after a brief spike into positive territory following the release of the numbers.
WTI futures slid 2.1% to $25.25 in morning trading.
Brent futures, the global benchmark, fell 2% to $29.38.
Oil inventoriesfell by 745,000 barrels for the week ended May 8, the EIA said. That compared with expectations for a build of about 4.15 million barrels, according to forecasts compiled by Investing.com.
That was the first decline in U.S. crude stockpiles since the end of January.
Gasoline inventories fell by 3.5 million barrels, versus forecasts for a drop of 2.2 million barrels. Distillate stockpiles rose by 3.5 million barrels, compared with expectations for a build of about 2.9 million barrels.
“Except for distillates, we have an all-round set of bullish numbers that should please longs in the market,” Investing.com analyst Barani Krishnan said.
“Production-wise as well, we’ve had a daily drop of 300,000 barrels from the previous week that makes it a total decline of 1.5 million barrels per day since the record high of 13.1 million bpd seen in mid-March,” Krishnan said.
“But the muted price action we’re seeing suggests that the trade is more worried now about the implications of states rushing to reopen their economies without proper adherence to medical guidance,” he added.
Further easing storage concerns that last month pushed oil prices into negative territory for the first time, the EIA said inventories at the Cushing, Okla. hub fell by 3 million barrels.
That “reinforces the belief that the storage hub will not hit capacity after all,” Krishnan said.