Crude oil fell as U.S. refineries reduced their crude use by the most in almost four months.
Plants processed 2 percent less crude in the seven days ended May 8 than the previous week, the Energy Information Administration said in a report on Wednesday. The refinery utilization rate fell by 1.8 percentage points. Analysts surveyed by Bloomberg had expected a gain.
Oil has recovered from a six-year low in March as U.S. companies reduced the number of active rigs to the fewest since September 2010, bolstering speculation that output will slow. Production was little changed last week, the EIA report showed, while crude inventories fell for a second week. Prices gained earlier as the dollar slumped to a four-month low.
“The downtick in the refinery utilization could allow oil inventories to rebuild in the coming weeks,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “That was a bit of a surprise.”
West Texas Intermediate for June delivery fell 25 cents to close at $60.50 a barrel on the New York Mercantile Exchange after earlier climbing as much as 1.8 percent. The volume of all futures traded was about 12 percent above the 100-day average for the time of day. Prices have advanced 14 percent this year.
Brent for June settlement, which expires Thursday, slipped 5 cents to $66.81 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a premium of $6.31 to WTI.
Refineries used 16.3 million barrels a day of crude last week, down from 16.6 million the previous week, the EIA said. That was the biggest drop since Jan. 16. Plants operated at 91.2 percent of their capacity, down from 93 percent. Analysts surveyed by Bloomberg had expected a gain of 0.5 percentage point.
U.S. crude production was 9.37 million barrels a day last week, up 5,000 from the previous week, according to EIA estimates. Production reached 9.42 million on March 20, the highest level in weekly data going back to 1983.
“Prices came off their highs after the report, which may be due to the production number,” Rob Thummel, a managing director and portfolio manager at Tortoise Capital Advisors LLC in Leawood, Kansas, who helps manage $16.9 billion, said by phone. “Production was flat. There was probably some disappointment because of the rig count we’ve seen. It’s yet to really have an impact.”
The U.S. oil rig count fell to 668 last week, the lowest level since 2010, according to Baker Hughes Inc.
Crude stockpiles decreased by 2.19 million last week to 484.8 million. Analysts surveyed by Bloomberg had forecast a drop of 250,000. Stockpiles at Cushing, Oklahoma, the delivery point for WTI futures, slid by 990,000 to 60.68 million.
The American Petroleum Institute was said to report yesterday that inventories dropped by 2 million barrels and Cushing supplies fell by 827,000, according to ForexLive.
The EIA report “pretty much dovetails with the API numbers,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $3.4 billion. “It’s already been priced in. We actually saw a decline in refining activity and that’s surprising.”
U.S. shale oil producers seem to have “blinked” in their “supposed standoff” with the Organization of Petroleum Exporting Countries and the “relentless rise in U.S. supply seems to be finally abating,” the International Energy Agency said in a month report Wednesday.
Gulf-based members of the Organization of Petroleum Exporting Countries are boosting supplies as they escalate a battle to preserve sales volumes, the IEA said.
The IEA raised its estimate for non-OPEC supply growth in 2015 by 200,000 barrels a day on “surprisingly strong” output in the first quarter from countries including Russia, China and Colombia. Non-OPEC producers, which account for about 60 percent of global supplies, will expand output this year by 830,000 barrels a day to 57.8 million a day.