Prices of crude dipped on Wednesday after a pessimistic industry report on United States stockpiles, particularly a lower than expected build in gasoline supplies ahead of the summer driving season.
On the New York Mercantile Exchange, West Texas Intermediate crude for June delivery slumped 0.45 percent to $44.46 per barrel.
The American Petroleum Institute reported that oil production rallied 3.450 million barrels last week, higher than the 300,000 build forecasted.
Distillates stocks declined 1.360 million barrels, compared to an expected drop of 1.3 million barrels, while gasoline stockpiles gained 217,000 barrels below the 800,000 barrel slump anticipated.
Crude stockpiles in the United States are their highest levels in more than 80 years and are dangerously near to hitting full storage capacity.
Meanwhile, government report on Wednesday from the United States Department of Energy’s Energy Information Administration is seen to indicate a small build in crude inventories, despite moderate draws in gasoline and distillate fuel on the week.
A day earlier, crude futures surged steeply amid heavy short covering, one day after struggling one of its lowest sessions on the calendar year, as market players continued to react to huge wildfires in Canada and widespread changes in the leadership structure of Saudi Arabia’s leading state run oil company.
On the Intercontinental Exchange, Brent crude for July delivery staggered between $43.33 and $45.60 per barrel, before settling at $45.55, soaring $1.91 or 4.38 percent on the session.
North Sea Brent futures recovered on Tuesday after sliding nearly 6 percent overnight in one of its lowest trading days over the last two months.
Energy investors are still keeping a close eye on devastating fires in Canada, where estimates of the number of barrels being forced offline from the firestorms continued to grow.
Overnight, the Canadian consulting company Energy Aspects estimated that the wildfires in Alberta was the reason for bringing 1.6 million barrels per day of oil offline, higher than 1 million barrels per day forecasted earlier.
As oil company scramble to set a time table for getting their production sites up and running, many have been forced to delay the timing of their workers’ return to the area.
Meanwhile, the state run company in Saudi Arabia Aramco is planning to pump up production in response to anticipations of rising demand.
According to Aramco CEO, “We’re seeing a global increase in demand. We are looking at the current market status that, even though challenging, is an excellent opportunity for growth.”
Although United States crude futures have edged higher considerably since reaching 13 year lows in February at $26.05 per barrel, they are still well below nearly 40 percent since November 2014, when the Organization of Petroleum Exporting Countries decided not to slash production in order to protect market share.
As stated by the Energy Information Administration, “During the first three months of 2016, crude oil prices were relatively more volatile than in recent history. This elevated volatility occurred when overall oil prices were low, and volatility was driven by high uncertainty related to supply, demand, and inventories.”
“Crude oil price volatility has declined since its peak in March. Prices have risen as concerns about future economic growth have abated and as inventory growth has slowed since the start of the year.”