Oil prices eased Wednesday in choppy, thin trading, pressured by record high stockpiles at the Cushing delivery point for U.S. crude even as Libya and Middle East uncertainty supported oil, which remained on track to end the first-quarter up more than 10 per cent.
While gasoline inventories declined sharply and lifted U.S. gasoline futures, crude inventories rose more than expected last week and stocks at the Cushing, Oklahoma, hub jumped to a record high, according to the Energy Information Administration's weekly report.
Crude futures trading volumes well below three-day averages indicated traders remained comfortable on the sidelines as prices were buffeted by inventory data, the volatile Libyan conflict and unpredictable unrest in the Middle East.
Brent crude futures for May delivery fell 3 cents to settle at $115.13 (U.S.) a barrel, but more than $10 above their $94.75 price ending 2010.
U.S. May crude futures fell 52 cents to settle at $104.27 a barrel, swinging between $103.44 and $105.15, and more than $12 for the quarter.
On Monday, U.S. gasoline futures moved to a premium over heating oil for the first time since last August, and the premium is now trading at 2.44-cents a gallon based on Wednesday's settlements.
Gasoline futures' premium over heating oil reached 18 cents a gallon in 2010.
U.S. CRUDE STOCKS UP, GASOLINE DOWN
U.S. crude inventories rose a more-than-expected 2.95 million barrels last week, but gasoline inventories fell 2.7 million barrels, the EIA report said.
Distillate stocks, which include heating oil and diesel fuel, posted a slight gain against expectations of a dip.
"In addition to the fact that the large speculators are still peeling off long positions in the crude oil, today's dichotomy between the crude and gasoline markets was driven by the weekly EIA report," Jim Ritterbusch, president at Ritterbusch & Associates in Galena, Illinois, said in a note.
While recent drops in gasoline inventories reflect refiners draining winter grade fuel ahead of a specification switch and the summer driving season, analysts have noted resilient demand despite rising pump prices.
U.S. fuel exports also have soared, with the EIA reporting that finished gasoline exports in January were 87.3 per cent higher than a year ago.
Helping limit oil losses was ADP's employment report showing the U.S. private sector added 201,000 jobs in March, with the data arriving ahead of Friday's closely watched government monthly payrolls report.
A weaker dollar also helped limit dollar-denominated oil losses. Dollar weakness can be supportive to oil by making it less expensive for buyers using other currencies and attracting investment away from foreign exchange markets.
Unrest in Yemen, Syria, and Bahrain and the fight in Libya has kept oil supply threats in focus, and analysts continue to point out demand uncertainties with quake-hit Japan, sagging U.S. consumer sentiment and euro zone debt problems.
OBAMA SEEKS LOWER OIL IMPORTS
Oil prices shrugged off President Barack Obama's speech proposing to cut U.S. oil imports by a third over 10 years, a goal that has eluded his predecessors.
The speech was short on details on how to curb U.S. energy demand and Obama did not pretend there were any speedy measures to lower fuel costs that he acknowledged were a "big concern" to Americans.
Gold prices turned higher in choppy trade on Wednesday, snapping a four-session losing streak, as a broad resurgence of risk appetite prompted buying of bullion along with other assets ahead of Friday's U.S. jobs report.
Gold benefited from a weaker dollar against the euro after a top European Central Bank official said the ECB's interest rate hikes will be gradual, and world stocks rose more than 1 per cent as strong hiring by U.S. private employers boosted both U.S. and European markets.
"It seems that risk is flooding back in. It's finding its way back into precious metals and the stock markets, and that's driving the trade higher," said Zachary Oxman, managing director of TrendMax Futures.
Bullion was also boosted by buying ahead of the start of April and the second quarter, he said.
Gold is used as a safe haven in times of economic and political uncertainties, but its value also rises in prosperity as the price of bullion has almost sextupled from $250 an ounce in 2001.
Spot gold gained 0.4 per cent to $1,422 (U.S.) an ounce by 3:33 p.m. ET, having earlier touched a high of $1,430. U.S. gold futures for April delivery settled up $7.60 at $1,423.80.
Gold futures traded on the New York Mercantile Exchange were again one of the most actively trading commodity markets, with volume topping 200,000 lots, one of the heaviest trading days year to date.
Bullion's failure to capitalize on record highs on recent strong volume suggested some investors are skeptical about the metal's investment appeal, analysts said.
"It (higher volume) is showing some of the money in gold has been taken out and moved to other assets," Fred Schoenstein, trader at Heraeus Precious Metals Management said. "Gold's been a great asset over the last year, but why would you stay in a trade that has performed so well and so long when there are other markets where you can make money?"
A Reuters poll showed that gold's decade-long rally, which took the metal to record $1,447.40 an ounce last week, looks set to plateau in the second quarter as more downside risks for bullion emerge.
On charts, spot gold must close consecutively higher above its double-top resistance at $1,445 an ounce for a rise toward record $1,500 level, said Rick Bensginor, chief market analyst of Dahlman Rose.
GOLD/SILVER RATIO HITS 28-YEAR LOW
Silver climbed 0.7 per cent to $37.33 an ounce, sending the gold/silver ratio to below 38, the lowest level since 1983.
Daniel Major, an analyst at RBS, said that the price of silver has been largely driven by technical and momentum trading rather than the fundamentals.
Industrial demand for silver is set to rise to 665.9 million ounces by 2015 from $487.4-million ounces last year, metals consultancy GFMS said in a report prepared in conjunction with the Silver Institute.
Gold has struggled to eke out fresh gains as financial markets digest hints from the euro zone and U.S. authorities they may be set to tighten historically loose monetary policy.
"Gold players are anxiously waiting for policy signals from the U.S. and to see what the ECB (European Central Bank) actually does next week in its monthly meeting," said Credit Agricole analyst Robin Bhar.
Investors also await Friday's U.S. non-farm payrolls report, which could set the tone for the near-term direction of gold.
Platinum group metals rebounded after a recent sell-off as production at Japan's major auto plants are interrupted after the earthquake, tsunami and the subsequent nuclear crisis that hit the country nearly three weeks ago.
PGM sentiment improved after Nissan Motor Co Ltd said on Wednesday it would resume normal operations at all its Japanese plants except one by mid-April.
Platinum gained 2 per cent to $1,768.50 an ounce, while palladium rose 0.3 per cent to $750.72.
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