Oil prices retreated early in the day after the closely watched inventories report from the Energy Information Administration (NYSEMKT:EIA) yesterday confirmed Tuesday’s bearish data from the American Petroleum Institute (NYSEMKT:API), saying that US crude stockpiles increased by 7.2 mmbbls (million barrels) compared to an expected rise of just 1.7 mmbbls.
EIA said that gasoline inventories declined by 2.7 mmbbls, while distillates, which include heating oil, dropped 2.4 mmbbls.
API reported a 7.5 mmbbls rise in crude stockpiles, adding that gasoline stocks fell 81,000 barrels, while distillates declined by 2.5 mmbbls.
Last week’s higher than expected stockpile increases reflected lower demand, pushing down the prices. Crude was also pressured by a stronger US dollar, which gained against the euro after Fitch downgraded Portugal’s sovereign debt to AA-. A stronger American currency makes dollar denominated commodities including crude more expensive for holders of other currencies, curbing demand.
Later in the day, however, crude improved after European stock markets climbed despite an expected flat start, while futures for US stocks rose on today’s positive economic data.
European markets gained support from today’s UK retail sales update, which showed a month on month growth of 2.1% following a 3.5% decline in February. Another bullish update came out later in the US, revealing a steeper than expected decline of 14,000 in initial jobless claims last week to 442,000.
The FTSE 100 added 0.5% by mid afternoon, while the Dow Jones Industrial Average is currently projected to open with a 0.4% gain to recoup yesterday’s losses.
May Brent Crude stopped just within 3 cents of US$80/barrel in London, while US light, sweet crude eclipsed US$81/barrel on the New York Mercantile Exchange (NYMEX).
Disclosure: The author holds no positions in the company