Crude-oil futures settled lower Wednesday, wiping out earlier gains as U.S. data confirmed an unexpected jump in crude inventories.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in February CLG5, -2.22% fell $1.28, or 2.2%, to $55.84 a barrel. The contract is down 2.3% on the week.
February Brent crude on London’s ICE Futures exchange LCOG5, -2.50% was down $1.45, or 2.4%, to $60.24 a barrel.
On Wednesday, the U.S. Energy Information Administration said commercial crude inventories rose 7.3 million barrels from the previous week to 387.2 million barrels. On average, analysts were looking for a decrease of 1.8 million barrels.
Late Tuesday, the American Petroleum Institute said its data showed a 5.4-million-barrel gain in U.S. crude stockpiles for the week ended Dec. 19. Rising U.S. oil production due to the shale boom has been largely responsible for the glut in oil markets, and a large build-up in U.S. supply typically weighs on oil prices.
Meanwhile, Nymex reformulated gasoline blendstock for January RBF5, -3.16% — the benchmark gasoline contract — fell nearly 6 cents, or 3.7%, to settle at just over $1.51 a gallon. The contract is down 3% for the week.
Oil prices were volatile this week, and traders remain divided over whether the Brent oil benchmark will hold at $60 a barrel, which has emerged as a support over the last few days.
Brent crude is supported by the recent decline in Libyan oil production due to unrest, but “OPEC’s determination to fight for market share remains a dominant bearish fundamental factor,” analyst Tim Evans at Citi Futures said.
The Organization of the Petroleum Exporting Countries, led by its largest producer, Saudi Arabia, has refused to intervene to support oil prices. That could mean high-cost producers will be driven out of the market first.
The oil cartel, however, risks a fall in revenue while waiting for other producers to blink first.
“The collapse in oil prices looks set to wipe out the Gulf’s external [current account] surpluses next year, leaving China and the euro-zone as the world’s major surplus economies,” Capital Economics said.
However, it estimates that Gulf economies should be able to weather lower oil prices without making big spending cuts for a short period, and could even run a small current account deficit in the coming years.
Natural gas for January delivery NGF15, -4.35% fell 14 cents, or 4.4%, to $3.03 per million British thermal units, while heating oil for January HOF5, -3.33% delivery declined nearly 7 cents, or 3.4%, to settle at just over $1.92 a gallon.