Oil Prices Rise in Volatile Trading

U.S. oil prices rose Thursday after an inventory report released earlier in the week sent traders mixed signals about supply levels in the market.

Government data released Wednesday had surprised traders, showing gasoline inventories fell by 3.3 million barrels—far more than expected. The unexpectedly large drop in inventories helped ease some analysts’ concerns about a supply glut and put oil prices on course for a second consecutive session of gains on Thursday.

“Without a sign that U.S. drillers are back in the fields ramping up production, or there is some global economic shock, there is a good chance we can head toward $50,” said Eugene McGillian, manager of research at Tradition Energy.

Yet markets have been volatile as of late, Mr. McGillian said, and some of Thursday’s gains appeared to stem from traders who had bet on oil prices falling closing their positions to lock in profits.

Light, sweet crude for September delivery rose $1.10, or 2.69%, to settle at $41.93 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, gained $1.19, or 2.76%, to settle at $44.29 a barrel.

Concerns about a persistent glut continue to pressure the market, analysts and brokers said. The U.S. Energy Information Administration’s data Wednesday also showed total petroleum products added 2.1 million barrels to commercial stockpiles, up to a total of 1.4 billion. Reports also showed oil production in Russia and Iraq reaching new highs.

“We’re going to continue to see pressure on the market because we simply remain oversupplied,” said Andy Lipow, president of Lipow Oil Associates in Houston. “Whether you call it crude oil, gasoline or distillates, there is too much stuff around.”

The glut in crude has been transferred into products after refiners took advantage of cheap oil to make gasoline and other fuels.

Still, the rebalancing of the oil market is taking longer than expected due to a confluence of factors. Rising production from the Organization of the Petroleum Exporting Countries, Russia and Brazil is keeping the global glut in place at the same time that the shaky global economic growth outlook risks undermining demand.
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