International benchmark Brent crude futures managed to defend $40 per barrel in early trading on Tuesday, standing at $40.51 at 0154 GMT, down 33 cents from their last settlement. On Monday, the contract had surged over 5.5 percent in intra-day trading and remains 50 percent above 2016 lows from Jan. 20
New York: Oil settled lower on Thursday after data showed higher weekly inventories at the US crude storage base despite a pipeline outage, but prices pared losses on short-covering, suggesting more volatility ahead.
"The energy trade remains choppy amidst fundamental and macroeconomic cross-currents that are shifting daily," Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Associates said in a note.
Brent futures LCOc1 settled down 41 cents, or about 1%, at US$39.43 a barrel, retracing losses from the session low that saw Brent down more than US$1, or nearly 3%.
US crude futures CLc1 finished down 49 cents at US$37.26, after tumbling as low as US$36.69.
Prices fell after market intelligence firm Genscape reported a build of 255,804 barrels at the Cushing, Oklahoma delivery hub for US crude futures in the week to Tuesday.
The build came even though TransCanada Corp had shut since Saturday its 590,000 barrels per day (bpd) Keystone crude pipeline that moves crude to Cushing and Illinois. The shutdown was ordered after the company feared a potential pipeline leak.
While Genscape did note a 481,485-barrel decline at Cushing in the five days to Tuesday, potentially from the Keystone outage, that was not enough to offset total inflows for the week.
"I guess people were expecting even more impact from the Keystone closure," said a trader.
Crude prices were also pressured by data showing oil exports from Iraq's southern ports at an average of 3.494 million bpd since the start of April, versus 3.286 million bpd in March.
Even so, as settlement approached, investors covered short positions and Brent and US crude futures retraced more than half their early losses.
Some attributed that to investor optimism that aside from Cushing, the overall supply-demand situation in US crude is becoming more balanced. A US government report on Wednesday showed a net draw of nearly 5 million barrels in domestic crude stockpiles last week.
"This lower move today sets us up for a strong day tomorrow, before the weekend," said Mark Scullion, broker at New York's Eclipse International. "It's what you call the 'Friday Hedge'."
Ritterbusch projects choppy price action of between US$35.00 and US$38.30 in US crude futures next week if the dollar weakens further from the Federal Reserve's downplaying of US rate hike expectations. - Reuters
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