WTI futures hover near 1-month low as US crude oil inventories jump

West Texas Intermediate crude remained near the lowest level in a month after government data showed that US crude oil inventories rose much more than expected, marking an eight consecutive weekly advance. Losses were limited as supplies at the biggest US storage hub fell for a sixth week and as motor gasoline inventories dropped above expectations. Also fanning positive sentiment, OPEC revised up its global demand growth forecast for 2014.

On the New York Mercantile Exchange, WTI crude for delivery April traded at $98.70 per barrel at 14:38 GMT, down 1.33% on the day. Prices shifted between a one-month low of $98.15 and days high at $99.60 per barrel. The US benchmark fell by 1.1% on Tuesday, a third straight daily drop, and settled at $100.03, the lowest close since February 11th.

Meanwhile on the ICE, Brent futures for settlement in the same month fell by 0.44% to trade at $108.07 a barrel. Prices held in a daily range between days high and low of $108.47 and $107.61. The European crude benchmark added 0.43% on Tuesday to settle at $108.55 a barrel. Brent traded at a premium to its US counterpart of $9.37 after it rose to $8.52 on Tuesday from $6.96 on Monday, based on closing prices.

US crude remained under pressure on Wednesday after the Energy Information Administration reported an eight consecutive weekly build in US crude oil inventories. Supplies rose by 6.18 million barrels in the seven days through March 7th, sharply exceeding a projected 2-million increase, according to a weekly Bloomberg survey of 10 analysts. At 370.0 million barrels, the highest since December 13th, U.S. crude oil inventories are in the upper half of the average range for this time of year.

Prices drew some support as inventories at Cushing, Oklahoma, the biggest US storage hub and delivery point for NYMEX-traded contracts, fell by 1.3 million barrels to 30.8 million, marking a sixth straight weekly drop. Analysts however feared that the southern leg of TransCanadas KeystoneXL pipeline, which began delivering crude from Cushing to the Gulf Coast in January, merely carried the bottleneck to Texas, having shown no effect on nationwide stockpiles levels so far.

The EIA also reported that refineries operated at four-month low of 86.0% of their operable capacity last week, down 1.4% from a week earlier. Gasoline and distillate fuel production both increased last week, averaging 9.4 and 4.6 million barrels per day, respectively.

Total motor gasoline supplies fell by 5.2 million barrels last week to 223.8 million, outperforming expectations for a drop of 2 million barrels, while distillate fuel inventories declined by 0.5 million barrels to 113.9 million, in line with forecasts for a 450 000-barrel drop.

China worries

The American benchmark crude marked its first weekly decline in eight last week as downbeat data from China spurred fears the Asian economy might miss Premier Li Keqiang’s economic growth target of 7.5%, which he set last week. Moreover, this was the lowest aim since 1990. China is the world’s second biggest oil consumer, trailing only the US, and will account for 11% of global consumption this year, according to the IEA.

China’s National Bureau of Statistics reported on Saturday that the Asian nation’s exports surprisingly contracted by 18.1% in February on an annual basis, confounding analysts’ expectations for a 6.8% expansion following January’s 10.6% growth.

Meanwhile, China’s imports rose by 10.1% in February, an inch above January’s 10% expansion and beating projections for an 8.0% jump. This led to the Asian economy’s first trade deficit since March 2013 and largest such since February 2012.

Poor consumer inflation data and a slowdown in manufacturing activity to an eight-month low in February also added to the sentiment that China might not be able to reach Premier Li Keqiang’s 7.5% growth target for 2014.

Market players are now awaiting the release of key data points from China, due on Thursday, to assess where the Chinese economy is headed and gauge demand prospects.

Global outlook

Oil prices however received support after the Organization of the Petroleum Exporting Countries raised its forecast for global demand growth in 2014 for a second consecutive month, contrasting with the Energy Information Administrations forecast reduction on Tuesday.

The 12-member group said in its monthly report that global demand will jump by 1.14 million barrels per day this year, up 50 000 from its previous estimate, while also raising the forecast for global demand of crude pumped by it. The upward revision was based on projections for accelerating economic growth in the US and Europe, while a slowdown in emerging economies, especially China, was raising concerns and capping gains.

The group also reported that its total crude output rose by 258 600 barrels per day last month to an average of 30.1 million bpd, the strongest level since August, as Iraq offset supply shortages in Libya and Saudi Arabia.

In the latest series of chaos in the African producer, the Libyan parliament deposed Prime Minister Ali Zeidan due to his inability to regain control of the country’s oil production, its main source of revenue. The vote came after rebels humiliated the government as a tanker loaded crude oil at a rebel-held export terminal and fled from Libya’s navy.

According to the state-run National Oil Corporation, the African countrys output stood at 441 000 bpd today, up from 392 000 bpd on Tuesday. Libya, the holder of Africas biggest crude reserves, pumped an average of 350 000 bpd last month, down from 1.4 million bpd in March 2013 as eastern ports remained under the control of rebel groups, while the El Sharara oilfield was blocked by protesters.