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 U.S. crude was trading at $44.26 a barrel by 6:41 a.m. ET, down 19
cents but off a six-year low hit on Wednesday. Brent was up 20 cents
at $48.67.
The U.S. Energy Information Administration (EIA) said domestic crude
stocks had risen by almost 9 million barrels week-on-week to nearly
407 million, the highest level since the government began keeping
such records in 1982.
That pushed U.S. crude to an intraday low of $44.08, the weakest
since April 2009, but Brent held up relatively well.
"It's a tug of war between the non-supportive fundamentals and
investor flows - investors are more concerned about missing a
potential bounce," said Ole Hansen, senior commodity strategist at
Saxo Bank. "But there is nothing bullish to be found in those
numbers."
Analysts expect stockpiles to keep building as U.S. production has
shown no sign of slowing, and when refiners enter seasonal
turnarounds, utilisation rates will fall.
In addition, the market structure gives traders an incentive to buy
cheap crude for storage, with the aim of selling it at a higher
price for future delivery.
Some traders believe such buying to store has provided a "false
bottom" in the market, and that when land storage becomes filled, or
floating-storage economics no longer work, there will be another
selloff in futures.
"Traders buying and putting oil into storage may be holding the
price for now," said Christopher Bellew, a broker at Jefferies Bache
in London. "I see the market as being in a consolidating phase ...
(but) at some point I expect a move to the downside."
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He suggested Brent could test $40 or lower. "My principal reason for
being so bearish is the production war within OPEC as Saudi and Iraq
both seek to maximise sales and U.S. production has not yet started
to slow."
In an earnings call, Shell's Chief Executive Ben van Beurden said he
saw oil prices stabilising at $90 per barrel in the long run but
that it was difficult to predict when this could happen.
He added that oil markets would remain volatile in the medium term
given that the fall in prices of over 50 percent in the last six
months was caused by a relatively small oversupply, amounting to
only 2 percent of global demand.
(Additional reporting by Henning Gloystein in Singapore; Editing by
Dale Hudson)
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