By Barani Krishnan
Investing.com -- Oil longs attempted on Wednesday to regain control of a market that had plunged the most in a week since the start of the pandemic, especially with peace talks between Russia and Ukraine making little headway.
But data showing a weekly build in U.S. crude stockpiles put a lid on a strong comeback.
U.S. crude’s West Texas Intermediate, or WTI, benchmark was up 31 cents, or 0.3%, at $96.75 a barrel by 12:25 PM ET (16:25 GMT), rebounding from a session low of $94.64.
But London-traded Brent, the global benchmark for oil, was down 56 cents, or 0.6%, at $99.35 a barrel. Earlier in the session, Brent fell to $97.61, not far from Tuesday’s bottom of $97.50, which marked a low since Feb. 25. Brent flew to a post-Ukraine invasion high of $139.12 on March 7.
Crude showed promise of a rebound after Ukraine denied Russian claims that Kyiv was open to adopting a model of neutrality comparable to Sweden in a peace deal.
Russian negotiators said Ukraine had offered to become a demilitarized state, but Kyiv denied this, saying it needed “legally verified security guarantees” to keep itself safe and would not accept any other model.
The Ukrainian stance also came after the U.S. embassy said Russian troops "shot and killed 10 people standing in line for bread" in northeast Ukraine.
“Some people are speculating because Russia is taking such heavy losses in Ukraine, that it's looking for some type of an exit strategy from this war,” Phil Flynn, energy analyst at the Price Futures Group in Chicago said.
But oil’s chance of a stronger rebound was also foiled by weekly U.S. oil inventory data that wasn’t exactly supportive for longs in the market.
U.S. oil stockpiles rose for the first time in four weeks, data from the Energy Information Administration showed Wednesday as refiners appeared to return to the national reserve some crude loaned out by the government in a bid to alleviate supply tightness in the market and tamp down pump prices at multi-year highs.
The government has loaned out more than 24 million barrels of crude since November to petroleum refiners to reduce the amount of oil they buy directly from the open market — in the hope that will cap prices for both the raw material and the fuel sold at pumps. Companies that receive crude barrels through the exchange agree to return the oil they receive, with an additional amount to compensate the government.
Crude stockpiles across the United States rose by 4.345 million during the week ended March 11, the EIA’s Weekly Petroleum Status Report showed. Strategic Petroleum Reserve showed a corresponding build of 4.3 million barrels from the first inflow in months to the nation’s emergency oil reserve.
The average price of gasoline at U.S. pumps hit record highs above $4 a gallon this month after global market tightness for both crude oil and petroleum products were exacerbated by Western sanctions imposed on major energy exporter Russia for its war against Ukraine.
Brent itself hit 14-year highs above $139 a barrel on March 7, before clambering down to below $100 this week.
Aside from the reserve build, the Cushing, Oklahoma, hub that takes delivery of U.S. crude piped in from drilling wells saw an inflow of 2.2 million barrels last week to reach 24.2 million barrels, the EIA data showed.
“To surmise, it was the first major build for both the SPR and Cushing in a while, and helps unwind some of the tight market psychology built around the two hubs,” said John Kilduff, founding partner at New York energy hedge fund Again Capital.
Stockpiles of distillates, which are refined into diesel for trucks, buses, trains and ships as well as fuel for jets, rose for the first time in 10 weeks, building by 332,000 barrels last week, the EIA data showed.
Inventories of gasoline, known as petrol universally and America’s most-consumed oil product, were down 3.616 million barrels last week, sliding for a sixth week in a row.