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Crude futures hit by Department of Energy update, energy stocks mixed in London

Oil prices quickly rebounded from recent falls, climbing returning above US$80 today after absorbing a hit from yesterday’s update from the US Department of Energy (DoE), which reported an increase of 3.7 million barrels in US oil stockpiles in the week to 8 January. Distillate reserves also unexpectedly increased during the week, adding 1.4 million barrels, offering signs of a weakening oil demand in the US. However, crude futures later gave way, erasing most of their gains.

March Brent Crude slid to US$78.75/barrel, while US light, sweet crude retreated to US$79.75/barrel.

This data was slightly different from Tuesday’s report from the American Petroleum Institute (NYSEMKT:API), which said that oil stocks increased 1.2 million barrels, while distillate inventories rose by 3.6 million barrels and gasoline supplies rose by 6.8 million barrels in the week ending 8 January.

Crude futures have been on decline this week after China, which is the world’s second largest energy consumer, tightened its monetary policy to curb economic growth and prevent the economy from overheating, signalling possible declines in oil demand in that country. Prior to that, oil prices were on a hot streak with US benchmark crude reaching $84 after an unexpectedly cold weather hit the world’s key energy consuming countries including the US to spur the demand for heating oil.

Major oil and gas stocks didn’t show much movement in the morning. Tullow Oil (LSE: TLW) was in the lead with a 1.3% climb. Supermajors BP (LSE: BP) and Shell (LSE: RDSB) declined marginally, while BG Group (LSE: BG) shed 1.2% and another FTSE 100 constituent Cairn Energy (LSE: CNE) was flat.

Petrofac (LSE: PFC) also made little headway, while fellow services company Amec (LSE: AMEC) posted an insignificant loss.

Midcaps were mixed. Heritage Oil (LSE: HOIL) and Soco International (LSE: SIA) were the top performers, advancing 1.3% and 1% respectively, while Dana Petroleum (LSE: DNX) added less than 1%.

JKX Oil & Gas (LSE: JKX), Premier Oil (LSE: PMO) and Salamander Energy (LSE: SMDR) declined marginally, while Dragon Oil (LSE: DGO) was down 1% and Melrose Resources (LSE: MRS) slid to the bottom of the pile with a 3.5% loss.

Services also were mixed as Wood Group (LSE: WG) added nearly 1%, while Wellstream Holdings (LSE: WSM) declined marginally.

Iraq and Algeria operating Gulf Keystone Petroleum (AIM: GKP) led the juniors, climbing 8% after upping its oil and place estimate for its Shaikan structure in the Kurdistan region of northern Iraq.

Mongolia-focused Petro Matad Ltd (AIM: MATD) headed in the opposite direction, sliding 5%.

Disclosure: The author holds no positions in the company