Oil prices hit 2016 highs, pares gains on US oil inventory data

Oil prices rose on Wednesday, however, gains were pared as glut concerns resurfaced. ConocoPhillips photo.

By Barani Krishnan

NEW YORK, June 8 (Reuters) – Crude futures rose on Wednesday, hitting 2016 highs above $50 a barrel and settling up for a third straight day on worries about sabotage of oil facilities in Nigeria, although a build in U.S. gasoline stocks amid peak summer demand could pressure prices.

U.S. crude stocks fell for the third consecutive week, sliding by 3.2 million barrels versus analysts’ expectations for a 2.7 million-barrel drawdown, government data showed.

But gasoline inventories grew by 1 million barrels and distillates, which include diesel and heating oil, rose by 1.8 million barrels, versus forecasts of drawdowns.

This indicates a sentiment that gasoline demand will weaken more than expected or that the crude glut will be reflected by a gasoline glut, said Troy Vincent, crude oil analyst for New York-headquartered energy data provider ClipperData.

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Brent crude settled up $1.07 at $52.51 a barrel. It extended gains in post-settlement trade, reaching $52.60 a barrel by 3:55 p.m. EDT (1955 GMT), the highest since October.

U.S. crude futures rose 87 cents, or 1.7 percent, to settle at $51.23 a barrel. The session high was $51.34, a peak since July.

“The gasoline build was a big surprise, specially since the driving season is underway,” said Tariq Zahir, managing partner at Tyche Capital Advisors in New York, which specializes in long-dated spread trades in U.S. crude futures.

Zahir said the market was experiencing a momentum trade in spot crude helped by a weaker dollar, while longer-dated oil remained in contango, or pricier to the spot contract, due to builds in products such as gasoline and distillates. “This, in our opinion, should limit the gains in spot prices.”

Oil rallied early, after the Niger Delta Avengers militant group said it had blown up a Chevron oil well in Nigeria, rejecting peace talks with the government. Rebel attacks have brought oil output in Nigeria, once Africa’s largest crude producer, to a 20-year low.

Prices were also supported by data showing China’s May crude oil imports at over six-year highs.

The dollar’s drop to five-week lows boosted demand for greenback-denominated oil from holders of other currencies.

Crude futures have nearly doubled from 13-year lows of $27 for Brent and $26 for WTI this winter.

“The trend is your friend and picking tops can be painful as all of the money out there chasing trends from the systematic side of the market can overwhelm,” said Scott Shelton, broker at ICAP in Durham, North Carolina.

(Additional reporting by Karolin Schaps in LONDON; Editing by Marguerita Choy and David Gregorio)