Oil edged lower on Wednesday in choppy trading as investors looked to pocket profits from two straight days of gains, and as markets debated supply tightness.
Brent crude closed 37 cents, or 0.5%, lower at $78.28 a barrel, while West Texas Intermediate crude fell 23 cents, or 0.3%, to $72.97.
“The markets are trying to find equilibrium,” said Dennis Kissler, senior vice president of trading at BOK Financial, noting heavy fund buying over the last two days.
On the supply side, worries of tightness after an unexpected draw in U.S. oil stockpiles and a halt to some Iraqi Kurdistan oil exports were partially offset by a smaller-than-expected output cut in Russia.
U.S. crude oil stockpiles fell unexpectedly last week, the Energy Information Administration said, as refineries ramped up operations after maintenance season and U.S. imports fell to a two-year low.
EIA data also showed a larger-than-expected draw in gasoline stocks, implying strong demand heading into the summer season.
“Today’s EIA report was bullish, but the broader story is much more challenged right now,” said John Kilduff, partner at Again Capital LLC in New York, citing economic fears and supply concerns.
News of the surprise drop in inventories came on top of a 450,000 barrels per day (bpd) of crude export halt on Saturday from Iraq’s semi-autonomous northern Kurdistan region following an arbitration decision.
Norwegian oil firm DNO said it had begun shutting down production at its fields in Kurdistan. The company’s Tawke and Peshkabir fields averaged output of 107,000 bpd in 2022, a quarter of total Kurdish exports.
U.S. oil and gas activity stalled in the first quarter as production gains slowed and drillers’ outlooks turned negative, a survey released by the Federal Reserve Bank of Dallas showed.
Supply concern were, however, eased by reports that Russian oil production fell by around 300,000 bpd in the first three weeks of March, less than the targeted cuts of 500,000 bpd.
Meanwhile, markets also awaited clarity on the banking crisis and U.S. Federal Reserve’s plans for rate hike. Oil prices had plunged to a 15-month low on March 20 after global financial markets were roiled as investors balked at the collapse of two U.S. lenders and the rescue of Credit Suisse.
The dollar edged higher against most major peers, pausing its recent declines. A stronger greenback hurts oil demand as crude becomes more expensive for buyers who hold foreign currencies.