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Oil steady ahead of US inventories update, API data shows 2.2 million barrel drop

Crude futures were trading within a narrow range today ahead of this week’s inventories update from the US Department of Energy (DoE), which is scheduled to come out today. Tuesday’s data from the American Petroleum Institute (NYSEMKT:API), which showed a surprising decline of 2.2 million barrels in crude stocks against the expected increase of 1-1.5 million barrels, had little impact on price movements.

Updates that could potentially impact the oil prices include the Federal Reserve’s announcement on interest rates, which, however, is not expected to signal any changes to the current ultra low rates.

Yesterday, crude slightly declined from Monday’s levels following a flat finish on Wall Street, where the main stock market indexes posted small gains after China reportedly raised ratio requirements for a few large banks and told them to curb lending in the latest step to tighten its monetary policy and prevent the economy from overheating.

March Brent Crude inched higher to US$73.48/barrel, while US light, sweet crude stopped just short of US$75/barrel.

Oil and gas producers were in decline today. Tullow Oil (LSE: TLW) slid to the bottom with a loss of over 4% after announcing a share placing to raise nearly £1 billion to fund the development of its assets in Uganda.

Supermajors BP (LSE: BP) and Shell (LSE: RDSB) declined 1%, as did BG Group (LSE: BG) and Cairn Energy (LSE: CNE).

Services companies did better as Amec (LSE: AMEC) gained 1%, while oil and gas engineering firm Petrofac (LSE: PFC) was unmoved.

Midcaps followed the trend as most FTSE 250 energy producers were sitting in the red by mid afternoon. Dragon Oil (LSE: DGO) lost nearly 4%, while Salamander Energy (LSE: SMDR) was down 2.5% and Dana Petroleum (LSE: DNX) slid 1.5%. JKX Oil & Gas (LSE: JKX) retreated 1%, Soco International (LSE: SIA) declined marginally and Heritage Oil (LSE: HOIL) was flat, as were services companies Wood Group (LSE: WG) and Wellstream Holdings (LSE: WSM).

Eastern Europe focused junior Aurelian Oil & Gas (AIM: AUL) led the small caps with a 10% climb after pricing its proposed placing at 32 pence. Energy investor Xtract Energy PLC (AIM: XTR) followed, advancing 8% on no news.

Africa focused energy company Dominion Petroleum (AIM: DPL) headed in the opposite direction, shedding 4%, while Africa and FSU operating oil and gas junior Victoria Oil & Gas (AIM: VOG) and Ukraine focused gas producer, Regal Petroleum (AIM: RPT) were down 3.5% and 3%.

Disclosure: The author holds no positions in the company