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US crude down 3% after big stockpile build
[NEW YORK] Oil prices tumbled on Wednesday, with US crude settling about 3 per cent lower, after an unexpectedly large inventory build in the world's biggest oil consumer renewed worries about oversupply.
The US Energy Information Administration (EIA) said crude inventories rose 2.5 million barrels last week, versus analysts' forecasts for a draw of 500,000 barrels.
Gasoline and distillate stocks also rose, the EIA said, driving down oil prices that had mostly risen in the past two weeks on speculation of an output freeze by Opec.
US West Texas Intermediate (WTI) futures settled down US$1.33, or 2.8 per cent, at US$46.77 per barrel.
Brent crude futures fell 91 US cents, or 1.8 per cent, to close at US$49.05.
"I cannot continue to stress that at this time of year we are supposed to be getting draws," Tariq Zahir, oil trader at Tyche Capital Advisors in New York, said, referring to the summer inventory drawdowns expected amid peak demand for motor fuels.
"But instead, we're seeing a build in every single aspect that's quite eye opening. The Street has gotten it wrong again, with predictions that you'll start getting rebalancing of supply-demand in the third quarter."
Gasoline stocks in the US Gulf Coast hit seasonal highs not seen since 2013. There was also an increase of 4 million barrels of "other oils" last week, described by some traders as less-valuable industrial oils that refiners crank out when there was too much gasoline.
"It's ridiculous how much of oil we're swimming in," said Phil Davis, trader at PSW Investments in Woodland Park, New Jersey.
US gasoline futures were the only bright spot in the oil complex, settling up modestly after a spate of refinery outages and on concerns about a possible hurricane headed towards the US Gulf Coast where many oil and gas installations were located.
Crude futures have swung from bear to bull market territory this month as renewed worries of an oil glut were subdued by speculation that the Organisation of the Petroleum Exporting Countries will agree to an output curtailment with non-members led by Russia at a meeting in Algeria next month.
A similar production freeze idea failed in April and analysts remain skeptical it will work now as some Opec members keep pumping at high levels even while touting the plan.
"There is currently a race to print any freeze headlines but we have not yet seen strong substance behind them," said Olivier Jakob, managing director at PetroMatrix, an energy consultancy in Zug, Switzerland.
That could lead to more market volatility, some say.
Opec prattle of output curbs could encourage an influx of speculative capital and price pullbacks of around US$2-US$3 a barrel, Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Associates, said.