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(Bloomberg) — Oil fell after the biggest four-day rally since January 2009 before government data forecast to show crude inventories expanded in the U.S., the world’s largest oil consumer.
Futures dropped as much as 2.6 percent in New York. Crude stockpiles probably rose by 3.25 million barrels last week, a Bloomberg News survey shows before an Energy Information Administration report. Brent in London closed Tuesday more than 20 percent above its Jan. 13 settlement, meeting a common definition of a bull market.
Oil has staged a rebound from the lowest prices in almost six years amid signs that U.S. companies will reduce output in response to the market’s collapse. It will be “a long time” before crude returns to $100 a barrel, said Bob Dudley, the chief executive officer of BP Plc, which pledged to cut about $2 billion of planned spending, mirroring moves by competitors including Chevron Corp.
“The size of the rally is a pointer to what’s going on and that’s essentially something that’s been driven by market dynamics — short covering and bargain hunting,” Ric Spooner, a chief strategist at CMC Markets in Sydney, said by phone. “It looks increasingly likely that the shale-oil producers are going to assume the mantle of the swing producer. The realistic outlook is probably for a smaller surplus rather than any near- term return to balance.”

Crude Supplies

West Texas Intermediate for March delivery decreased as much as $1.40 to $51.65 a barrel in electronic trading on the New York Mercantile Exchange and was at $52.18 at 12:01 p.m. Singapore time. The contract advanced $3.48 to $53.05 on Tuesday, the highest close this year. The volume of all futures traded was about 73 percent above the 100-day average.
Brent for March settlement slid as much as 72 cents, or 1.2 percent, to $57.19 a barrel on the London-based ICE Futures Europe exchange. It gained $3.16 to $57.91 on Tuesday. The European benchmark crude traded at a premium of $5.29 to WTI.
U.S. crude inventories probably climbed for a fourth week to about 410 million barrels through Jan. 30, according to the median estimate in the Bloomberg survey of 10 analysts. That would be the highest level in weekly data compiled by the EIA since August 1982.
Stockpiles increased by 6.1 million barrels last week, the American Petroleum Institute in Washington said on Tuesday, according to reports on Twitter. The industry group collects information on a voluntary basis from operators of refineries, bulk terminals and pipelines, while the government requires that data be filed with the EIA, the Energy Department’s statistical arm.

U.S. Strike

U.S. refiners probably reduced operating rates by 0.5 percentage point last week, the Bloomberg survey shows. Runs averaged 85.5 percent of capacity through Jan. 16, the lowest since April 2013.
Royal Dutch Shell Plc and United Steelworkers leaders met on Tuesday to discuss a new three-year labor contract amid the nation’s largest refinery strike since 1980. The union, representing employees at more than 200 refineries, terminals, pipelines and chemical plants, stopped work at nine sites on Feb. 1 after negotiations stalled.
The sites affected by the halt account for 10 percent of U.S. refining capacity, data compiled by Bloomberg show. One plant has ceased production and a full walkout of union workers would threaten as much as 64 percent of fuel output.
Brent’s rebound is stalling as futures approach technical resistance along the 50-day moving average, according to data compiled by Bloomberg. This indicator is at $58.12 a barrel on Wednesday. Sell orders are typically clustered around chart- resistance levels.

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net To contact the editors responsible for this story: Pratish Narayanan at pnarayanan9@bloomberg.net Yee Kai Pin