U.S. Distillates Rise Causes Oil Losses As Traders Ignore Crude And Gasoline Draws

Meanwhile, Singapore refining giant ownership stake is targeted by commodity traders: File Image/Pixabay

After supply tightness concerns due to geopolitical tensions caused a series of oil price gains this week, traders on Wednesday were suddenly spooked by data showing an increase in U.S. diesel stockpiles – which triggered demand worries and losses for the commodity, albeit minimal.

As of 1720 GMT, Brent lost 25 cents to $68.22 per barrel, and West Texas Intermediate declined 21 cents to $64.31.

Ironically, the Energy Information Administration disclosed that crude inventories – usually the factor motivating oil trading - fell sharply last week by 9.29 million barrels; gasoline stocks, also normally regarded as an indicator of demand, fell by 2.3 million barrels to 217.6 million barrels, with gasoline demand rising by 302,000 barrels per day (bpd) to 8.8 million bpd

However, distillate stockpiles rose by 4 million barrels to 217.6 million barrels, and Phil Flynn, senior market analyst at Price Futures Group Inc., noted that  "Looks like markets are responding on diesel, which is the soft underbelly of the entire complex."

Supply tightness concerns on the global front were nullified on Wednesday by energy company Kazmunaygaz announcing that Kazakhstan had resumed oil supplies through the Baku-Tbilisi-Ceyhan pipeline; also, Nigeria lifted a six-month emergency rule in Rivers, a state located in the hub for Nigeria's crude exports.

Sure to influence oil trading in the upcoming session is the U.S. Federal Reserve, which was expected to make a decision on interest rates later on Wednesday: Fawad Razaqzada, analyst at City Index, wrote in a note, "The likely rate cut itself is clearly fully priced in; the wording and projections are what matter…traders want to see hints of a proper cutting cycle."

In other oil news on Wednesday, sources with knowledge of the matter told media that commodity traders Vitol and Glencore will formally bid to buy Chevron's 50 percent stake in Singapore Refining Company, which operates Singapore's second-biggest refinery with a crude unit capacity of 145,000 bpd.

One source said the company in total could be valued at about $1 billion.

Brant Fish, president of international products at Chevron, earlier stated his company's desire to have a balanced portfolio of products, and said there will be geographies and refineries "like here in Singapore, where we've chosen to not make those big investments and actually get a better return through most parts of the cycle on capital employed."