Oil was little changed after a government report showed that U.S. crude and fuel inventories surged while equities gained on economic optimism.
Futures fell 5 cents after the Department of Energy said crude stockpiles rose 1.31 million barrels to 361.3 million and output reached the highest level since 1993. The combined gain of crude, gasoline and distillate supplies was 15.5 million barrels, the most since 1996. Oil rebounded from the session’s lows as the Standard & Poor’s 500 snapped a two-day slide.
“There’s a significant supply overhang in the market,” said Adam Wise, who helps manage a $9 billion natural-resource bond portfolio as managing director at Manulife Asset Management in Boston. “In a benign news environment, it will be harder to ignore the fundamentals of the oil market.”
Crude oil for February delivery settled at $93.10 a barrel on the New York Mercantile Exchange. Trading volume was 9.2 percent below the 100-day average. The daily move was the fifth in a row of 20 cents or less, the first time that’s happened since 2002. Oil is up 1 cent this week.
Brent oil for February settlement declined 18 cents to $111.76 a barrel on the London-based ICE Futures Europe exchange. Volume was 25 percent above the 100-day average.
Last week’s increase in inventories was less than the gain of 2 million barrels that was the median estimate of 11 analysts surveyed by Bloomberg.
Crude output climbed 0.2 percent to 7 million barrels a day last week, the highest level since 1993, the report showed. Production has increased 17 of the last 18 weeks. The nation will pump 7.92 million barrels a day in 2014, the department said yesterday in the monthly Short-Term Energy Outlook.
The S&P 500 rose on optimism that U.S. corporate earnings will extend third straight year of growth after Alcoa Inc. (AA) unofficially began the U.S. earnings reporting season yesterday with better-than-estimated sales.
Futures surged to $93.87 a barrel on Jan. 2 in New York, the highest intraday level since Sept. 19, following a budget compromise in Washington that averted most of the so-called fiscal cliff of spending cuts and tax gains. The S&P 500 also increased on the agreement, reaching a five-year high last week.
Imports of crude oil rose 18 percent to 8.34 million barrels a day, the first gain in four weeks. U.S. imports in 2012 averaged 8.65 million barrels, according to weekly department data, which would be the lowest level since 1997.
“Crude oil supplies continue to rise with the remarkable increase in U.S. production,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “This is making us less reliant on imports overall. The barrels that would have come here are now available, so U.S. output is having an impact on global supply.”
Increasing output in the U.S. and Canada has bolstered supplies at Cushing, Oklahoma, the delivery point for West Texas Intermediate crude, the grade traded in New York. Stockpiles at the hub rose 332,000 barrels to a record 50.1 million in the seven days ended Jan. 4.
The discount of WTI to Brent narrowed to $18.66 from $18.79 yesterday. The spread has slipped from $25.53 on Nov. 15 as Enterprise Products Partners LP (EPD) and Enbridge Inc. (ENB) prepare to resume service this week on the 500-mile (805-kilometer) Seaway pipeline to full rates after boosting its capacity to 400,000 barrels a day from 150,000. The link connects Cushing to refineries in the Houston area.
“The most interesting energy story of recent weeks has been the reduction of the WTI-Brent spread,” Wise said. “Ramping up the Seaway pipeline to 400,000 barrels a day will alleviate the bottleneck at Cushing and put further pressure on the differential.”
Gasoline inventories climbed 7.41 million barrels to 233.1 million, versus an expected gain of 2.5 million. Distillate inventories increased 6.78 million barrels to 130.7 million, versus a forecast advance of 1.9 million.
Total fuel consumption dropped 1.4 percent to 18.9 million barrels a day in the four weeks ended Jan. 4, the report showed. Gasoline demand fell 1.4 percent over the period to 8.44 million barrels a day, the least since March.
“Both product demand and inventories are very bearish,” Evans said.
Refineries operated at 89.1 percent of capacity last week, the report showed, down from 90.4 percent the previous week.
Electronic trading volume on the Nymex was 387,446 contracts as of 2:51 p.m. Volume totaled 454,577 contracts yesterday, 6.1 percent below the three-month average. Open interest was 1.48 million.
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