Oil Rebounds From Dip Into Bear Market as Glut Worries Ease

(Bloomberg) -- Oil has recovered all its losses from last week, when it slipped into a bear market, as concern over a supply glut eases.

A report that U.S. gasoline stockpiles dropped helped futures cap a 5.5 percent increase over the past five sessions on Wednesday. Inventories that have remained stubbornly high at the start of the summer driving season fell 894,000 barrels last week, the Energy Information Administration said. While total U.S. crude stockpiles rose by 117,999 barrels, the amount of oil held at the Cushing hub fell for the sixth week in a row.

"At least there were draws in gasoline and distillates," Brian Kessens, a managing director and portfolio manager at Tortoise Capital Advisors LLC in Leawood, Kansas, who helps manage $17.1 billion in energy assets, said by telephone. "The market’s giving the gasoline demand numbers the benefit of the doubt."

Oil tumbled into a bear market last week on concerns that rising global supply will undermine output cuts from the Organization of Petroleum Exporting Countries and its partners. U.S. crude inventories remain more than 100 million barrels above the five-year seasonal average, according to data from the Energy Information Administration.

West Texas Intermediate for August delivery settled 50 cents higher at $44.74 a barrel on the New York Mercantile Exchange, after touching $44.84. It traded at $44.88 as of 5:06 p.m.

See also: Cheapest Fuel Since 2005 Brings U.S. Drivers ‘Christmas in July’

Brent for August settlement closed up 66 cents at $47.31 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $2.57 to WTI.

U.S. crude output fell to 9.25 million barrels a day, the lowest level since April and the biggest decline in nearly a year. Meanwhile, gasoline demand fell for the third time in four weeks.

In a survey conducted by the Federal Reserve Bank of Dallas, the majority of energy executives don’t expect the oil market will come into balance before the second half of 2018 -- with a third saying it would be 2019 or later. The outlook on prices was tempered. On average, respondents expect WTI to increase to $48.79 a barrel by the end of the year.

The slight crude build combined with the gasoline draw, which is expected during the summer, makes for a mixed report, Stephen Schork, president of Schork Group Inc., a consulting group in Villanova, Pennsylvania, said on Bloomberg TV.

"This report strikes me as a push, neither bullish nor bearish," he said. "The biggest concern for the oil bulls at this point" is what happens when demand declines in the fall while U.S. drillers are still adding barrels.

Oil-market news:

• Russia isn’t discussing deeper output cuts with OPEC, Energy Minister Alexander Novak told reporters in Moscow.

• Canada’s active rigs climbed to 169 last week, the highest level since March, according to data posted on the Canadian Association of Oilwell Drilling Contractors website.

• Short positions held by speculators in Brent crude advanced to 169 million barrels last week, the highest since records started in 2011, according to exchange data.

• Rosneft kept its oil flowing normally after a cyber attack, although some filling station cash registers were affected.

(An earlier version of the story corrected the headline to say gasoline supplies decreased.)

--With assistance from Ben Sharples Grant Smith and Vonnie Quinn

To contact the reporter on this story: Meenal Vamburkar in New York at mvamburkar@bloomberg.net.

To contact the editors responsible for this story: Reg Gale at rgale5@bloomberg.net, Carlos Caminada, Susan Warren

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