Oil prices sink after surprise US crude stock build

[NEW YORK] Oil prices slumped on Wednesday after government data showed US crude inventories grew more than expected last week as a Texas chemical spill hampered exports.

Brent crude futures settled at US$67.83 a barrel, down 14 cents or 0.2 per cent. US crude futures settled at US$59.41 a barrel, falling 53 cents or 0.9 per cent.

US crude inventories rose last week by 2.8 million barrels, compared with analysts' expectations for a decrease of 1.2 million barrels, the US Energy Information Administration said.

Crude exports fell by 506,000 barrels per day, the EIA said.

"The market report was slightly bearish," said Phil Flynn, an analyst at Price Futures Group in Chicago. "The reason the market is not taking it as even more bearish is because a lot of the build was in the Gulf Coast, and we know the Gulf Coast has had issues with the Houston Ship Channel."

A petrochemical tank fire and chemical spill last week along the Houston Ship Channel hampered crude shipments for several days, prompting Texas officials on Tuesday to sue the owners of the storage facility.

"There are ships lined up in the channel to go out and ships lined up to get into the channel," said Donald Morton, who runs an energy trading desk at investment banking firm HJ Sims & Co. "It will work itself out. The worst is behind us now."

Disruptions to Venezuelan exports helped to limit oil price losses.

On top of US sanctions in January which banned US refiners from buying Venezuelan oil, the Opec member's main oil export port of Jose and its four crude upgraders were unable to resume operations following a widespread three-day power blackout. The outage is the second in a month.

Oil prices have rebounded roughly 30 per cent from 2018 lows, supported by supply curbs by the Organization of the Petroleum Exporting Countries and other major producers, along with US sanctions on exports from Venezuela and Iran.

Oil output from Russia, Opec's biggest non-member ally, averaged 11.3 million barrels per day so far in March, sources said, compared with 11.34 million barrels each day the previous month.

Russia's energy minister, Alexander Novak, said earlier in March that the country planned to speed up oil output cuts.

Hedge funds and other money managers have increased bets that demand for oil will be sustained, even as the market rallied last week.

REUTERS