Oil prices wavered after
new government data Wednesday showed some disappointing signs on demand, but
the market is still holding to gains tied to a meeting among exporters who may cap
their output.
The oil market has been
pushing higher since the Qatari oil ministry said members of the Organization
of the Petroleum Exporting Countries will meet with Russian energy officials
and other oil producers in April to hash out an agreement to limit output.
Prices have rallied in recent weeks on hopes that such production limits will
help alleviate the global glut of crude.
The market did, however,
have a brief setback from U.S. Energy Information Administration data that
showed gasoline stockpiles shrank less than expected last week. That erased
nearly all the gains gasoline futures had made in early trading and briefly
sent crude retreating, too, before it rebounded.
Light, sweet crude for
April delivery recently gained $1.35, or 3.7%, to $37.68 a barrel on the New
York Mercantile Exchange. Brent, the global benchmark, gained $1.30, or 3.4%,
to $40.04 a barrel on ICE Futures Europe.
Gasoline futures recently
traded up 0.6% to $1.4164 a gallon, paring gains from earlier that had sent the
market as high as $1.4365 a gallon. Diesel futures gained 3.7% to $1.2211 a
gallon.
On Wednesday, the Qatari
oil ministry said the preliminary agreement last month between OPEC and
non-OPEC producers to limit their oil production to January levels has "put a
floor under the oil price.” In recent weeks, Brent crude has rallied to around
$40 a barrel, up from decade lows of less than $28 a barrel in January.
"The vast majority of the
up move in prices seen over the last several months has been in anticipation of
a meeting of producers with the expectation that a freeze deal will get done,”
said Dominick Chirichella, oil analyst at the Energy Management Institute.
The next meeting to discuss
output limits is to be held April 17 in Doha, Qatar, which holds the rotating
presidency of OPEC this year and has been coordinating the effort.
Many have been skeptical of
any deal, however, in large part from OPEC’s history of failing to follow
through on pledges of production cuts and caps. Stockpiles are also brimming
with supply around the world, and if exporters only freeze production and don’t
cut it, that oversupply may not wane.
U.S. storage levels, both
for crude alone and in total combined with refined fuels, increased last week,
EIA said. Total stockpiles grew to 1.3474 billion barrels as of March 11, up
from 1.3456 billion the week before.
Data released late Tuesday
from the American Petroleum Institute, an industry group, had shown a slight
decline. That didn’t happen in large part because gasoline stockpiles didn't
fall as quickly as API and many analysts had expected. They dropped by just
747,000 barrels, compared with analysts’ expectations of a 2.6-million-barrel
decline and API’s report of a 1.2-million-barrel decline.
"This rally is going to be
especially difficult to sustain,” said Ric Navy, senior vice president for
energy futures at brokerage R.J. O’Brien & Associates LLC. "There’s still
plenty of inventory on the crude side. You’re building inventories, not great
amounts, but the fact that it’s a build and that’s still negative.”
U.S. production did,
however, make a slight decline to 9.07 million barrels a day, down from 9.08
the week before. It is a slight decline, but continues a longer trend of
falling production down from a peak of 9.7 million last April.
"We may see some strength
for prices coming from possible U.S. production declines,” wrote Daniel Ang, an
investment analyst at Phillip Futures, but he added, "Based on fundamentals we
expect prices to be moving downwards by the end of the week even if prices do
increase today.”
(
Wall Street Journal)