Crude futures pared early gains Wednesday as an increase in U.S. oil stockpiles briefly turned traders' attention from Middle East unrest.
Light, sweet crude for April delivery recently traded four cents higher at $105.06 U.S. a barrel on the New York Mercantile Exchange, after trading as high as $105.92 U.S. a barrel earlier in the session. Brent crude on the ICE futures exchange traded $2.71 higher at $115.77 U.S. a barrel.
U.S. crude inventories rose by 2.5 million barrels last week, according to the report from the Department of Energy, a larger-than-anticipated increase. However, gasoline stocks fell by 5.5 million barrels and stocks of distillates, including heating oil and diesel, dropped by four million barrels, bigger drops than analysts had expected, and a sign that demand may be rising despite higher fuel prices.
Still, stockpiles in Cushing, Okla., the delivery point for Nymex-traded futures, rose to a record high of 40.3 million barrels. High supplies at the key storage point have depressed the U.S. benchmark West Texas Intermediate against its European counterpart, Brent, in recent weeks, and the record level Wednesday pushed the price spread between the two contracts to over $10 U.S.
A series of massive explosions in Libya Wednesday erupted into fires near an oil facility outside of Ras Lanuf, an important oil depot. These are the latest clashes in what increasingly looks like a civil war between Moammar Gadhafi and opposition forces. The rebels control the eastern part of the country, while pro-regime forces are holding most areas near the capital, Tripoli.
Fighting has reduced oil production in the country by one million barrels a day, with little crude being exported. While Saudi Arabia has pledged to increase production to make up for lost supplies, the prospect of spreading unrest in the region has kept oil prices above triple digits.
Saudi Arabia has said it is increasing production to make up for at least some lost Libyan crude oil. The kingdom's oil minister, Ali al-Naimi, on Tuesday said there is enough crude oil and spare capacity in the market to meet demand.
Naimi said the country has about 3.5 million barrels a day of spare capacity, down from last month when spare capacity stood at four million barrels a day, implying a production increase of about 500,000 barrels a day.
The Libya crisis has trumped U.S. oil-supply data in recent weeks, though the weekly report helped boost fuel product futures.
Front-month April reformulated gasoline blendstock, or RBOB, recently traded 7.21 cents, or 2.4%, higher at $3.0188 U.S. a gallon. April heating oil recently traded 5.51 cents, or 1.8%, higher at $3.0662 U.S. a gallon.
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