The difference between US and global oil prices rose to the highest level in almost a year following data that showed a further increase in US crude stocks.
Data from the US Energy Information Administration showed commercial crude inventories had risen for a seventh consecutive week to the highest level for this time of year since the 1930s.
Stocks increased by 8.4m barrels to 434.1m in the week ending February 20 and since the start of the year have built at around 1m barrels per day. They are expected to keep growing as refiners undergo maintenance and US production remains extremely high.
The rise in stocks pushed the spread between West Texas Intermediate, the US oil marker, and Brent, the global benchmark, to more than $10 a barrel on Wednesday. Six weeks ago WTI briefly traded at a small premium to Brent.
The latest build in US crude inventories is a further sign of the supply glut that has pushed oil prices down almost 50 per cent since the middle of June.
Analysts say the global oil surplus is increasingly concentrated in the US, where production has yet to slow in spite of the collapse in prices. Last week, US crude output rose 5,000 barrels to 9.285m barrels a day. To put that figure in perspective, production was just over 8m barrels a day a year ago.
“The sharp increase in crude stocks has been far bigger than we would normally expect at this time of year,” said Thomas Pugh of Capital Economics.
“The extremely cold weather last week forced some refineries to shut down as pipes froze. What’s more, refineries had been delaying repair and maintenance work to take advantage of the high margins currently available, but several plants have been unable to delay essential maintenance work any longer and have had to shut down,” he added.
In spite of the EIA report, oil prices moved higher on Tuesday, albeit with Brent outpacing its US counterpart. While Nymex April WTI added 47 cents to $49.75 a barrel, ICE April Brent advanced $1.03 cents to $59.69.
Traders said the market had been braced for a large increase in stocks after a report from the American Petroleum Institute on Tuesday night forecast an 8.9m increase in stocks.
In addition, the increase in crude stocks was offset by a large drawdown of distillates, which include diesel and heating oil. Analysts said this probably related to the cold snap that has affected much of central and eastern regions of the US.
Earlier in the day, oil prices were supported by comments from Saudi Arabia, the world’s biggest crude export. The country’s oil minister, Ali al-Naimi, told reporters at a conference that: “markets are calm now . . . demand is growing”.
Mr Naimi was the driving force behind Opec’s decision in November not to cut production in spite of a sharp price fall. Oil prices were also helped by data that showed China’s manufacturing sector had expanded slightly in January.
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