By Nicole Friedman
NEW YORK--Oil prices climbed Wednesday after inventory data
showed that U.S. oil production fell last week for the first time
since January.
However, stored supplies of crude oil continued to increase.
Inventories rose for a 12th straight week to 471.4 million barrels,
a record in weekly data, the U.S. Energy Information Administration
said Wednesday.
Light, sweet oil for May delivery recently traded up $1.44, or
3%, to $49.04 a barrel on the New York Mercantile Exchange.
Brent, the global benchmark, rose $1.34, or 2.4%, to $56.45 a
barrel on ICE Futures Europe.
Domestic crude-oil output fell by 36,000 barrels in the week
ended March 27 to 9.4 million barrels, which is still near the
highest level in decades. Production last fell on a weekly basis in
the week ended Jan. 30.
"Perhaps this is the first sign of a leveling off of oil
production in the U.S.," said Andy Lipow, president of Lipow Oil
Associates in Houston.
Oil prices have plunged more than 50% since June as surging U.S.
production helped push the global market into an oversupply. Energy
companies have since announced large spending cuts, and the number
of rigs drilling for oil in the U.S. has dropped sharply. But
analysts say those pullbacks can take months to translate to lower
oil output, since new technology and efficiency gains mean that
producers can pump more oil from existing wells.
The weekly EIA data is often revised in monthly reports. In its
latest monthly report released this week, the EIA reported that
crude-oil production fell to 9.2 million barrels a day in January,
from 9.3 million barrels a day in December.
"The market may be getting the sense now that we are seeing the
effect of the decline in rig count and production figures," Mr.
Lipow said. "It certainly may be the beginning of a trend."
Investors have become concerned in recent months about growing
U.S. crude-oil stockpiles, especially in Cushing, Okla., the
delivery point for the benchmark Nymex contract. Cushing supplies
rose by 2.6 million barrels last week to 58.9 million barrels, the
highest level on record, the EIA said.
If Cushing storage levels hit maximum capacity, that could weigh
on prices as sellers competed to find buyers with space left to
store oil. The EIA said in September that Cushing's working
capacity is 70.8 million barrels.
Nationwide, last week's stockpile build was roughly in line with
what analysts surveyed by The Wall Street Journal had expected.
"It's already a story everyone knows," said Elaine Levin,
president of energy brokerage Powerhouse, of growing crude-oil
inventories. "I still think it keeps a cap, at least in the short
term, on how high this market can rally."
Gasoline stockpiles fell by 4.3 million barrels to 229.1 million
barrels, the lowest level this year. Analysts had predicted
stockpiles would fall by an average of 900,000 barrels.
Gasoline futures recently rose 2.7% to $1.8181 a gallon.
Distillate stocks, which include heating oil and diesel fuel,
rose by 1.3 million barrels. Analysts had expected a 300,000-barrel
weekly decrease.
Diesel futures rose 1.8% to $1.7393 a gallon.
Prices pared earlier losses after weaker-than-expected U.S.
economic data weighed on the dollar. Oil is priced in dollars, so a
weaker dollar makes oil more affordable to buyers using foreign
currencies. Oil prices and the dollar have tracked each other
closely in recent months.
Nuclear talks between Iran and six world powers missed the
deadline for a preliminary agreement Tuesday. But officials
remained hopeful that they could reach an agreement outlining
elements of a final nuclear deal to be reached by June 30.
Oil-market participants are keeping a close watch on the
negotiations because a deal could lead to the lifting of
international sanctions on Iran, paving the way for more Iranian
crude to flood an already oversupplied global market.
Write to Nicole Friedman at nicole.friedman@wsj.com
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