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Timothy Puko
Updated May 4, 2016 3:15 p.m. ET

Oil prices divided Wednesday over signs of growing stockpiles and threats to supply around the world.

Light, sweet crude for June delivery settled up 13 cents, or 0.3%, to $43.78 a barrel on the New York Mercantile Exchange, down from gains that had reached nearly 3% in morning trade. Brent, the global benchmark, fell 35 cents, or 0.8%, to $44.62 a barrel on ICE Futures Europe, down from earlier gains of about 2%. Brent is on a four-session losing streak.

The U.S. Energy Information Administration said Wednesday that crude stockpiles grew by 2.8 million barrels last week, more than double what analysts and an industry group had estimated. Gasoline stockpiles also showed an unexpected addition of 536,000 barrels. Those additions boosted total crude and product stockpiles to a record high of 1.37 billion barrels, the EIA said.

Gasoline was the first market to flip to losses after the data, with traders questioning whether record demand from U.S. drivers will hold up now that prices have rebounded in recent weeks. Refineries boosted their work to 89.7% of capacity last week from 88.1% the week before, even with gasoline stockpiles at 242 million barrels, among the highest levels of the past 26 years, according to the EIA.

“That’s more than enough to get us through summer,” said Donald Morton, senior vice president at Herbert J. Sims & Co., who runs an energy-trading desk. “There’s a lot of product in the marketplace.” Crude oil storage tanks at the Cushing, Okla., oil hub. Photo: Reuters

Gasoline dropped 1.5% at $1.4866 a gallon. The market has been partly reliant on U.S. drivers to drain away a glut of oil, and the unexpected addition to gasoline stockpiles raises questions about whether they can keep pace with crude supplies that keep overwhelming demand, said Tariq Zahir, who oversees $6 million as managing member of Tyche Capital Advisors LLC.

“The fact the demand hasn’t come back as quickly as expected [definitely] can be a...pressure on spot crude,” he said. “Too much oil.”

Oil prices have jumped by more than 60% since their lows earlier this year as traders speculate a nearly two-year downturn in prices is leading to slowing production and a more balanced market. Many think that trend had kept propping up oil earlier in the day with a series of threats to supply across the world.

Wildfires have led to evacuation orders in northern Alberta, forcing oil-sands companies to shut down or slow operations. Dry weather in Venezuela could reduce its ability to make hydroelectricity, forcing it keep more of its oil to burn for power, said Ric Navy, senior vice president for energy futures at brokerage R.J. O’Brien & Associates LLC. The semiofficial Fars news agency in Iran is also reporting threats from the country’s military to block some vessels from the Strait of Hormuz, the narrow passage through which about a third of the world’s seaborne oil shipments pass.

But the market has been so influenced by momentum that the rally now faces a big risk, Mr. Navy said. Several analysts have said prices have gone too high too fast, warning a retreat is likely to come soon because output and stockpiles are still so high. With the attempt to restart that rally falling apart, it may lead traders to conclude that forecast is coming to pass and the next step is further down.

The “stats crushed the rally,” Mr. Navy said.

Stockpiles of distillates, including diesel fuel and heating oil, did shrink by 1.3 million barrels while analysts expected them to remain unchanged. Diesel futures lost 0.4% at $1.3282 a gallon.

Write to Timothy Puko at email@example.com





 Crude wavers as stockpiles grow

Traders question whether demand can whittle record stockpiles