--Crude lower as market balances inventory data, OPEC
meeting
--EIA: Oil inventories fall by 200,000 barrels, refinery runs
climb
--OPEC is expected to keep production elevated
By Dan Strumpf
NEW YORK--Oil futures gave back earlier gains Wednesday as
traders weighed a drop in U.S. oil inventories with a coming
decision on output by Organization of Petroleum Exporting
Countries.
The group is widely expected to keep production levels unchanged
at historically high levels when it meets in Vienna on
Thursday.
Light, sweet crude for July delivery fell 47 cents, or 0.6%, to
$82.85 barrel on the New York Mercantile Exchange, after rising as
high as $84.01 earlier in the day.
Brent crude on ICE Futures Europe was 12 cents, or 0.1%, higher
at $97.26 a barrel.
Futures had rallied earlier the session after the Energy
Information Administration said U.S. oil inventories last week fell
by 200,000 barrels. Stocks of both gasoline and distillates dropped
sharply, while refineries ratcheted up operations, the EIA
said.
But crude had given up its gains within two hours of the report,
as signs emerged that OPEC members favored leaving the group's
output ceiling unchanged. OPEC sources told Dow Jones Newswires
that the group appeared to be crystallizing around that outcome,
even as some ministers complained of oversupply.
"People are starting to figure in that there's not going to be a
change in production by OPEC, and that's dragging down the crude
right now," said Carl Larry, president of trading-advisory firm Oil
Outlooks and Opinions.
OPEC's production was 31.582 million barrels a day in May, the
group said this week. That's nearly 1.6 million barrels a day more
than the group's total production limit agreed upon in
December.
The increase has been largely driven by higher Saudi oil
production this year to around 10 million barrels a day.
"I expect the production ceiling to be rolled over, but this is
all subject to our discussions," said Kuwait oil minister Hani
Hussain.
OPEC's output decisions are influential in setting global oil
and fuel prices. The group produces around a third of the world's
oil supply and holds more than 80% of global proven oil
reserves.
"We're just waiting for the OPEC meeting to fall apart," said
John Kilduff, founding partner at Again Capital in New York. "I
think that's going to end in disarray... and the Saudis will stand
firm on their willingness to pump."
Crude-oil prices have fallen more than 20% from their peak in
the spring, as the deepening euro-zone crisis has spurred fears of
slowing growth world-wide, and as demand remains weak in the U.S.,
the world's biggest consumer.
But a bright spot for U.S. demand emerged in Wednesday's
inventory data.
Gasoline inventories last week fell by 1.7 million barrels,
while stocks of distillates, including heating oil and diesel,
dropped 100,000 barrels. Refineries raised output by 0.1 percentage
to 92% of capacity.
Analysts had expected oil inventories to fall by 1.6 million
barrels last week, according to a survey of analysts by Dow Jones
Newswires. But gasoline inventories were seen rising 600,000
barrels, while distillates were expected to rise 900,000 barrels.
Refinery runs were seen falling 0.1 percentage point to 90% of
capacity.
The EIA's indirect measure of product demand rose 6.5% to its
highest level since August, bucking a trend of weakening demand for
petroleum products in the U.S.
Oil-market watchers closely follow the EIA's weekly inventory
survey for cues on supply and demand in the world's biggest oil
consumer. Inventories last month were at their highest level since
1990, amid persistently weak demand and sluggish economic
growth.
Front-month July reformulated gasoline blendstock, or RBOB,
recently rose 1.32 cents, or 0.5%, to $2.6634 a gallon. July
heating oil fell 0.67 cents, or 0.3%, to $2.6148 a gallon.
--Hassan Hafidh contributed to this article
Write to Dan Strumpf at dan.strumpf@dowjones.com