HOUSTON: Oil prices reversed course and fell over 2 percent on Wednesday after government data showed US refiners ramped up output, easing worries of a supply crunch, and as traders took cues from a drop in equities market.
Brent crude was down $2.41 cents, or 2.4 percent, at $109.52 a barrel at 12:05 a.m. ET (1605 GMT), while US West Texas Intermediate crude fell $2.5 cents, or 2.2 percent, to $1 09.85 a barrel.
Brent settled below WTI on Tuesday — the first time since May 2020 — and was still unusually trading at a discount due to strong export demand and tightening US crude stockpiles.
US crude inventories fell by 3.4 million barrels last week, government data said, an unexpected drawdown as refiners ramped up output in response to tight product inventories and near-record exports that have forced diesel and gasoline prices to record levels in the US.
Capacity use on both the East Coast and Gulf Coast was above 95 percent, putting those refineries close to their highest possible running rates.
“While on the face of it, the report was extraordinarily bullish, they (refiners) are racing to put more refined product on the market... there’s obviously a refiners response,” said John Kilduff, a partner at Again Capital LLC.
Both benchmarks also gave up earlier gains of $2-$3 a barrel following a change in risk sentiment as equity markets fell, said UBS analyst Giovanni Staunovo.