WTI futures retain gains as US distillate supplies drop for a fourth week

West Texas Intermediate crude rose for a second day on Wednesday after a government report showed that US distillate fuel inventories, a closely watched category during the winter season, fell for a fourth straight week as cold weather across most of the country stoked heating demand. Crude inventories rose less than projected.

On the New York Mercantile Exchange, WTI crude for settlement in March gained 0.3% to trade at $97.47 per barrel by 15:56 GMT. Prices shifted in a daily range between $98.25 and $97.21 per barrel. The US benchmark rose by 0.8% on Tuesday, ending a two-day loss, and jumped back to positive weekly territory following Wednesdays advance.

Meanwhile on the ICE, Brent futures for settlement in the same month added 0.11% to trade at $105.90 a barrel. Prices varied in a relatively narrow daily range between $106.43 and $105.79 a barrel. The European benchmark lost 0.3% on Tuesday but trimmed its weekly decline to little over 0.4% on Wednesday. Brents premium to its US counterpart narrowed to $8.59 on Tuesday, based on closing prices, and fell below $8 on Wednesday for the first time since October 10th.

US crude drew support after a government report showed that the recent cold weather across most of the US continued to drain the nations distillate fuel inventories, while crude supplies rose less than expected.

Distillate stockpiles, which include diesel and heating oil, fell by 2.36 million barrels to 113.8 million in the week ended January 31st, slightly less than analystss projections for a 2.5-million drop, and remained well below the lower limit of the average range for this time of the year.

Meanwhile, the Energy Information Administration also reported that the nations crude oil inventories rose by 440 000 barrels to 358.1 million last week, outperforming analysts expectations for an increase of 2.55 million barrels. This was in line with a private report by the industry-funded American Petroleum Institute that showed a build of 384 000 barrels.

Stockpiles at Cushing, Oklahoma, the biggest US storage hub and delivery point for NYMEX-traded contracts, dropped by 1.55 million barrels to 40.3 million after TransCanadas Keystone XL pipeline began carrying oil from Cushing to the Gulf Coast.

Total motor gasoline inventories rose by 0.5 million barrels last week to 235 million, beating the median projection of 10 analysts surveyed by Bloomberg for a 1.15-million increase.

Refineries operated at 86.1% of their operable capacity in the seven days to January 31st, down from 88.2% in the preceding period. Both gasoline and distillate fuel production decreased last week, averaging 8.8 million and 4.6 million barrels per day, respectively.

Domestic crude production remained unchanged at 8.04 million barrels per day, the government agency reported, after it reached 8.16 million bpd in the seven days through January 10th, which was the highest since 1988.

US crude imports fell by 1.2 million barrels per day to 6.9 million bpd in the previous week. Crude oil imports averaged 7.3 million bpd over the last four weeks, 6.5% below the same period a year earlier.

However, the market, and especially the Brent benchmark, was pressured after output at North Seas 200 000-bpd Buzzard oilfield was restarted and is projected to return to normal levels within days after a new glitch was reported on Monday.

Also adding to pressure on the supply side, tankers have resumed loading crude from Libyas 340 000-bpd El Sharara oilfield after bad weather closed ports in the western part of the country.