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Oil prices tumble 3% on record US crude build
[NEW YORK] Oil prices tumbled 3 per cent on Wednesday after a record weekly build in US crude inventories stoked investor worries about a global supply glut, days after analysts estimated higher monthly Opec crude output.
The US Energy Information Administration (EIA) said crude inventories rose 14.4 million barrels for the week ended Oct 28, far more than the 1.0 million barrels analysts had expected.
It was the biggest weekly rise in US crude stocks since records began in 1982, and exceeded the American Petroleum Institute's report on Tuesday of a 9.3 million-barrel build.
"This is very, very, very bearish. Nothing else in the report matters," said James L Williams, energy economist at WTRG Economics in London, Arkansas.
US West Texas Intermediate (WTI) crude settled down by US$1.33, or 2.9 per cent, at US$45.34 a barrel. It broke the US$45 support earlier, sinking to a five-week low of US$44.96.
Brent fell US$1.28, or 2.7 per cent, to settle at US$46.86, after sliding to US$46.46, its lowest since Sept 28.
Oil markets have been volatile lately on dithering by members of the Organization of the Petroleum Exporting Countries on a production cut the group announced on Sept 27 to rein in a crude glut that forced prices down from 2014 highs above US$100. Last month, Brent hit one-year highs of US$53.73 and WTI 15-month peaks of US$51.93.
"There are lots of longs coming out of the market, liquidating," said Tariq Zahir, who trades long-dated WTI spreads for Tyche Capital Advisors in New York.
"I wouldn't be surprised if by the end of the week or beginning of next week, we'll get to US$42 or US$41 a barrel, as very few believe Opec will make cuts that matter."
Opec output likely reached a record high of 33.8 million barrels per day (bpd) in October, a Reuters survey on Monday showed. The group meets Nov 30, hoping to finalise output cuts.
This week, two Opec members indicated they were more keen to raise production than cut. Nigeria said its output has recovered to 2.1 million bpd while Libya has doubled its output since mid-September and is producing about 590,000 bpd.
The US crude build came on the back of 2 million bpd jump in imports to just under 9 million bpd, the highest rate since Sept 2012. Prior to that, there were drawdowns in seven out of eight weeks.
"I don't think that imports will stay this high and (refinery) runs will be increasing from here," said Scott Shelton, broker and commodities specialist with Icap in Durham, North Carolina.
"This tells me that while this is an ugly report, it's the worst we are going to see for the rest of the year."