Oil futures finished little changed Wednesday after the government said oil inventories rose sharply last week, but the impact was blunted by a drop in gasoline stockpiles.
Oil stockpiles last week rose 5.3 million barrels, the Department of Energy said in its weekly report, as refiners cut utilization by 1.1 percentage points. Such a big increase typically weighs on oil prices, but a sharp drop in gasoline inventories and higher gasoline demand blunted the effect.
"The data was somewhat neutral," said Dominick Chirichella, analyst at the Energy Management Institute in New York. "I don't see it as being a market mover in any one direction or another."
Light, sweet crude for October delivery settled down 9 cents, or 0.1%, to $88.81 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange recently traded up 62 cents, or 0.5%, to $114.64 a barrel.
The DOE said gasoline stockpiles fell 2.8 million barrels last week, boosting the price of gasoline futures and keeping a floor under oil prices. The DOE's indirect measure of gasoline demand rose 2.4% in the week.
"Even though you had a build (in oil inventories), you had a draw in gasoline, which was probably expected due to this holiday weekend coming up," said Tony Rosado, broker at GA Global Markets in New York.
The DOE also said stocks of distillates, including heating oil and diesel, rose 400,000 barrels.
Analysts had called for an increase in oil inventories of 200,000 barrels, according to a survey by Dow Jones Newswires. They expected gasoline inventories to fall one million barrels, distillate stocks to increase 700,000 barrels and refinery use to fall 0.6 percentage point.
Market participants closely follow the DOE's weekly inventory report for cues on oil supply and demand in the world's biggest oil consumer. U.S. demand and the broader health of the economy have taken on increasing importance in the oil market in recent months, amid intensifying concerns that the recovery has stalled.
"Oil is reacting to the health of the economy," said Phil Flynn, analyst at PFG Best in Chicago. "When we hit the lows last week, we were in the depths of despair."
Crude prices could quickly rally, however, if a major storm emerges in the Gulf of Mexico that disrupts production. One storm that has piqued traders' interest is a "tropical wave" in the Caribbean Sea that the National Hurricane Center said has a 30% chance of turning into a hurricane over the next 48 hours.
Tropical Storm Katia, located deeper in the Atlantic, could also pose a threat if it intensifies and swings toward the Gulf.
Wednesday's modest decline means Nymex futures fell 7.2% during the month of August. The contract remains well off its high of almost $115 a barrel last reached in May, amid concerns about the recovery.
Market participants found little encouragement in data released Wednesday by payroll giant Automatic Data Processing, showing private-sector jobs in the U.S. rose by 91,000. Economists expected an August gain of 100,000.
Traders will be closely following Friday's nonfarm payrolls report from the Bureau of Labor Statistics for confirmation of the reading.
Front-month September reformulated gasoline blendstock, or RBOB, settled up 3.62 cents, or 1.2%, to $3.0320 a gallon. September heating oil settled up 0.9 cents, or 0.3%, to $3.0782 a gallon. Both contracts expired with the close of trading Wednesday.