Investing.com - U.S. crude oil inventories rose unexpectedly last week, which may help cool a rally that has driven prices to their highest levels in more than four months.
The Energy Information Administration said in its regular weekly report that crude oil inventories grew by 2.8 million barrels in the week to March 22.
That was compared to forecasts for a stockpile draw of 1.1 million barrels, after a decline of 9.59 million barrels in the previous week.
The EIA report also showed that gasoline inventories fell by 2.88 million barrels, compared to expectations for a draw of 2.78 million barrels, while distillate stockpiles dropped by 2.08 million barrels, compared to forecasts for a decline of 0.9 million.
Although oil prices turned negative immediately following the surprise build in crude inventories, crude began to pare those losses as investors examined the details.
At 11:07 AM ET (15:07 GMT), U.S. crude prices dropped 0.1% at $59.86 a barrel, moving off $59.58 hit after the release. West Texas Intermediate was at $59.99 prior to the publication.
London-traded Brent crude futures was up 0.1% at $67.49 a barrel, recovering from a post-report low of $67.19. Brent was trading at $67.62 ahead of the release.
“While on the surface the crude build is modest, it, nevertheless, is in defiance of the declining trend of the previous two weeks,” Investing.com senior commodity analyst Barani Krishnan said after the release.
Krishnan pointed out that the surprise build was due to a decrease in refinery runs and falling U.S. crude exports, while gasoline and distillate inventories both fell more than expected.
“It’s a mixed report at best, raising questions on whether the dataset could get more volatile from here,” he said.
The bullish “tight supply” narrative has sent crude prices up more than 25% this year, spurred by production cuts by OPEC and its allies, led by Russia, along with U.S. sanctions on Venezuela and Iran.
U.S. crude traded above $60 a barrel earlier Wednesday, close to a four-month high, although concerns over demand in a slowing global economy have kept additional gains in check.
Last Friday saw oil close down nearly 2%, its second-biggest drop this month, as a lack of progress in trade talks between the U.S. and China, along with weak economic data from Germany and the U.S. reignited concern over future demand.
West Texas Intermediate, the U.S. benchmark blend, has managed to recover around 1% so far this week thanks to Venezuela's second major blackout this month that left the South American nation's streets in darkness and its oil terminals without power.
“But once Wednesday comes and goes, economic worries and how those influence oil demand might matter even more,” Krishnan concluded.