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 Frigid weather supported heating oil prices and U.S. RBOB futures
saw some strength from traders unwinding the spread trade between
the heating fuel and gasoline, one trader said.
Oil markets had a muted reaction to U.S. Federal Reserve Chair Janet
Yellen's remarks that she will not make any abrupt changes in the
U.S. central bank's monetary policy, and that the Fed will continue
to reduce its stimulus.
U.S. crude oil reversed losses in post-settlement trade after data
from the American Petroleum Institute showed a 2.5 million barrel
draw from stocks at the contract's pricing point in Cushing,
Oklahoma.
A rise in U.S. crude oil narrowed its discount to Brent oil closer
to $8. <CL-LCO1=R>
Distillates, including heating oil and diesel, fell by 1.5 million
barrels, while U.S. crude stockpiles rose by 2.1 million barrels,
the API data showed.
Analysts had expected distillate stocks to fall 2.3 million barrels
last week, according to a Reuters poll. U.S. crude oil inventories
were expected to rise 2.7 million barrels.
"We are seeing good demand on the product side, particularly in
heating fuels, and refined products have been particularly reactive
to (API) reports lately," said John Kilduff, analyst at Partner
Again Capital LLC.
The U.S. Energy Information Administration (EIA) will release its
weekly inventory report at 10:30 a.m. EST on Wednesday.
Brent crude settled five cents higher at $108.68, after settling 94
cents lower in the previous session.
U.S. crude ended the day 12 cents lower at $99.94, but rose as much
as 55 cents to $100.49 after the API data were released.
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U.S. ultra-low sulfur diesel (ULSD) settled three cents higher at
$3.0281 per gallon. Gasoline settled up 2.78 cents to $2.7526 per
gallon.
U.S. crude oil prices were pressured by expectations that crude oil
demand will slow as U.S. refiners enter maintenance season.
The EIA expects U.S. oil production to drop slightly this year and
next as severe winter weather cut into well completion, even as the
agency expects a boost in shale oil output.
In the meantime, Brent's gains were capped by expectations of a
further increase in Libyan output. The North African nation's
current production is around 600,000 barrels per day (bpd), up from
its average rate in January.
North Sea Forties crude was offered lower but buyers remained on the
sidelines as traders expected differentials to weaken as European
refineries enter maintenance season.
(Reporting by Jacob Gronholt-Pedersen
and Alex Lawler; editing by William Hardy, Chris Reese, Marguerita
Choy and Diane Craft)
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