Oil Dips After Unexpected US Crude Inventory Build

Luke Sharrett/Bloomberg News

Oil futures dipped on Dec. 29 after a surprise build in U.S. crude inventories reversed an advance in prices that had boosted the benchmarks to their highest levels since July 2015.

U.S. crude stocks unexpectedly rose for the second straight week, data from the U.S. Energy Information Administration showed, gaining 614,000 barrels in the week of Dec. 19 versus analysts' forecasts of a decline of 2.1 million barrels.

At the Cushing, Oklahoma, delivery hub for U.S. crude futures, inventories rose 172,000 barrels, EIA said.

U.S. crude futures settled 29 cents, or 0.5%, lower at $53.77 a barrel while Brent crude fell 8 cents, or 0.1%, to $56.14 a barrel.

Traded volumes were thin, with many investors away for year-end holidays. Front month U.S. distillate and gasoline futures expire Dec. 30, which could add to price swings, analysts noted.

"The petroleum markets are mixed in light-volume trade amid a general wait for fresh fundamental news that might push prices out of their established ranges," Tim Evans, an energy futures specialist at Citi Futures, said in a note.

Both crude benchmarks have made big gains in December, touching year-to-date highs after the Organization of the Petroleum Exporting Countries and other producers agreed to curb production in an attempt to balance an over-supplied fuel market.  

"The market is in good shape, although it might fail to make significant advances this year," said analyst Tamas Varga at London brokerage PVM Oil Associates. "If that is the case, the uptrend should continue in early January."

"Either way, the odds are still on higher numbers."   

A committee of OPEC and non-OPEC producers will meet in Vienna on Jan. 21-22 to discuss compliance with the production agreement that is set to kick in on Jan. 1, Kuwaiti oil minister Essam Al-Marzouq told state news agency KUNA.