Oil prices settled slightly higher on Wednesday after a choppy trading session as the market digested U.S. government data showing that while there were signs a crude glut may be receding, inventories remained large with gasoline demand weak, Reuters reported.
U.S. West Texas Intermediate (WTI) crude CLc1 settled up 16 cents at $47.82 a barrel. Benchmark Brent crude LCOc1 was up 33 cents at $50.79.
In early trading, WTI fell as low as $47.30, the lowest since March 27, after the U.S. Energy Information Administration (EIA) said weekly crude stocks fell by 930,000 barrels to 527.8 million. That was less than half the forecast draw of 2.3 million barrels.
The session low for U.S. crude was close to a 50 percent retracement of the rally that started on Aug. 3, 2016, said David Thompson, executive vice-president at Powerhouse, an energy-specialized commodities broker in Washington.
If prices break below that level, he said, the "next major support zone comes in at the $45.33 to $44.09 zone."
Prices see-sawed as analysts also weighed EIA data showing gasoline stocks rose 191,000 barrels, much less than the predicted 1.3 million-barrel gain. However, gasoline demand slipped 2.7 percent over the last four weeks from the same period a year ago.
"This is continuing a trend since the beginning of the year in which sales have been lower and that is casting a shadow on the market and pressuring crude oil prices," said Andrew Lipow, president of Lipow Oil Associates in Houston.
"Gasoline demand is going to be the story going forward."
Kyle Cooper, consultant at ION Energy in Houston, saw "a slightly bullish report" when looking at the total inventory comparisons.
"With the (Strategic Petroleum Reserve) drawing, total U.S. petroleum stocks fell 161,000 barrels. Total U.S. inventories fell further below last year while the surplus to the five-year average fell. Total U.S. petroleum demand rose to almost 19.9 mbd and the highest since March 3," he said.
While the market fixates on U.S. production, investors are also monitoring whether producing countries have been complying with their 2016 deal to cut output around 1.8 million barrels per day (bpd) by the middle of the year.
Russia, contributing the largest production cut outside OPEC, said as of May 1, it had cut output more than 300,000 bpd since hitting peak production in October. However the latest Reuters survey of OPEC production showed the country's compliance had fallen slightly. OPEC meets on May 25 to discuss extending the agreement.