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[NEW YORK] Oil prices fell to their lowest in over five weeks on Wednesday following US data showing an unexpectedly large weekly build in US gasoline inventories and International Energy Agency (IEA) data projecting an increase in non-Opec production.
The increase in US gasoline inventories drove down RBOB futures by over 3 per cent, tugging Brent and US crude futures lower with them, analysts said. "Oil futures are being dragged down by gasoline futures. The industry continues to turn a crude oil surplus into a gasoline and distillate product surplus," Andrew Lipow, president of Lipow Oil Associates in Houston said.
After rising for three consecutive days, Brent crude futures were down US$1.67, or 3.4 per cent, at US$47.05 a barrel at 11:01am EDT (1501 GMT). US West Texas Intermediate crude , meanwhile, fell US$1.66, or 3.6 per cent, to US$44.80 per barrel.
That decline pushed both contracts to their lowest since May 5, driving them into technically oversold territory.
The US Energy Information Administration (EIA) said gasoline inventories increased by 2.1 million barrels during the week ended June 9, while crude inventories decreased by 1.7 million barrels.
That compares with analysts estimates in a Reuters poll for a 0.5 million barrel draw in gasoline stocks and a 2.7 million barrel draw in crude inventories.
The IEA said on Wednesday it expected growth in non-Opec supply to be higher next year than growth in overall global demand. "For total non-Opec production, we expect production to grow by 700,000 bpd this year, but our first outlook for 2018 makes sobering reading for those producers looking to restrain supply," the IEA said in its monthly oil market report. "The outlook for oil hinges on the effectiveness of the Opec cuts relative to the supply increases from US shale," said William O'Loughlin, analyst at Australia's Rivkin Securities.
The oil market needs strong demand to help offset the rapid increase in supply.
Global energy demand grew by 1 per cent in 2016, roughly in line with the previous two years, but well below the 10-year average of 1.8 per cent, BP said in its benchmark Statistical Review of World Energy on Tuesday.