Oil Up Sharply at Midday

NEW YORK (DTN) -- New York Mercantile Exchange crude oil and ULSD futures briefly dipped below Tuesday settlements after the Energy Information Administration reported a bigger-than-expected domestic stock build for crude oil and gasoline, but the contracts have since turned sharply higher.

Near 9:50 a.m. CT, NYMEX March West Texas Intermediate crude futures had increased $1.06 to $30.94 barrel while April Brent oil futures on the IntercontinentalExchange advanced $1.08 to $33.80 bbl.

The NYMEX March ULSD futures contract jumped 3.58 cents to $1.0467 gallon while NYMEX March RBOB futures contract remained fractionally lower at $0.9978 gallon.

The EIA report released at 9:30 a.m. CT showed crude soared 7.8 million bbl in the week-ended Jan. 29, about double the 3.0 million bbl supply increase expected for the week.

Gasoline stock increased by 5.9 million bbl, EIA said, doubling the expected 2.2 million bbl. Distillate fuel supplies were drawn down however, falling 776,000 bbl instead of holding steady as forecast.

The EIA report was more bearish for crude oil than the supply data shown Tuesday by the American Petroleum Institute. API had reported a crude stock build of 3.8 million bbl, as well as a 6.6 million bbl stock build for gasoline and a 141,000 bbl rise in distillate stocks.

NYMEX and ICE crude futures have mostly been on the upside since overnight after Russia reiterated it was open to discussing production cuts with the Organization of Petroleum Exporting Countries to stem falling oil prices.

Hope by bullish traders for a cut in OPEC output and the feeling that the futures' downside is overdone continue to support the oil complex, analysts said. Wednesday's gains remain tentative and a downward reversal can't be ruled out, the analysts added.

George Orwel can be reached at george.orwel@dtn.com