Oil drops as volatility concern counters reported inventory draw

Futures dropped as much as 0.8% in New York, briefly slipping below $63/bbl for the first time in more than two weeks. Prices earlier rose after data from the American Petroleum Institute showed an unexpected drop in stockpiles. Investors are watching whether the government confirms that decline when data are released later Wednesday.

“A crude stock draw is quite unusual for this time of year as refineries are closing down or preparing to shut for maintenance,” said Jan Edelmann, a commodity analyst at HSH Nordbank. “Financial markets pulled out of the nose dive, although ongoing volatility shows that we are not out of the woods yet.”

On Wednesday U.S. equity futures fell and the dollar rose. Despite the recent global markets selloff, Goldman Sachs Group Inc. stuck to its bullish call on commodities, saying the turmoil only bolstered its view that raw materials are set to perform well in the months ahead.

West Texas Intermediate for March delivery was down 31 cents at $63.08/bbl on the New York Mercantile Exchange as of 9:04 a.m. local time, after dropping 1.2% on Tuesday to the lowest since Jan. 19. Total volume traded was about 11% above the 100-day average.

Brent for April settlement was little changed at $66.83/bbl on the London-based ICE Futures Europe exchange, and traded at a premium of $3.93 to WTI for the same month.

U.S. crude stockpiles slid by 1.05 MMbbl last week, with storage also shrinking at tanks in the key hub of Cushing, Oklahoma, the API was said to report. By contrast, a Bloomberg survey predicts a 3.15-MMbbl increase in nationwide inventories.