Oil futures pare gains after U.S. inventories surge most on record

Oil prices pulled back Wednesday, with benchmark Brent turning negative as U.S. crude inventories surged the most on record, but the pullback was muted by hopes that a meeting between OPEC and allied producers on Thursday will trigger output cuts.

U.S. crude inventories rose 15.2 million barrels in the week, the most on record, as refiners slashed runs and the storage hub at Cushing filled more quickly than expected, the U.S. Energy Information Administration said in a weekly report on Wednesday.

Demand has fallen as the coronavirus outbreak forced closures of businesses and schools.

"There are multiple bad angles: Refining utilization. Crude stockpiles. Cushing is crazy - that`s a gigantic number," said Bob Yawger, director of energy futures at Mizuho in New York. The Cushing, Oklahoma, storage hub, which serves as the delivery point for the New York Mercantile Exchange U.S. oil futures contract, is on pace to be full in three weeks if this week`s gain is repeated, Yawger said.

Brent crude was down 11 cents, or 0.3%, at $31.76 by 11:06 a.m. EDT (1506 GMT). U.S. West Texas Intermediate (WTI) crude rose 63 cents to $24.26 a barrel, after earlier trading as high as $25.29 a barrel.

Despite the split, the benchmarks were supported by expectations that production cuts from OPEC may lie ahead.

Thursday`s videoconference meeting between the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia is expected to be more successful than their gathering in March, which ended in a failure to extend supply cuts and a price war between Saudi Arabia and Russia.

"The coming extraordinary producing-countries meeting is the only hope on the horizon for the market," said Bjornar Tonhaugen of Rystad Energy.

"Nobody wants to go short ahead of what could be a `positive surprise` by OPEC++."

Crude has collapsed in 2020 because of a slide in demand due to the coronavirus outbreak and excess supply. Brent dropped to $21.65, its lowest since 2002, on March 30.

While OPEC sources have said a deal to cut production is conditional on the participation of the United States, doubts remain as to whether Washington will contribute.

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The U.S. Department of Energy said on Tuesday U.S. output was already declining, without government action.