Oil Slumps on U.S. Crude Stock Build
Oil prices resumed their slide on Wednesday, with West Texas Intermediate crude futures (WTI) dropping more than 4 percent after US crude inventories unexpectedly surged.
Brent futures were down $1.77, or 2.9 percent at $60.20 a barrel by about 3 p.m. GMT, having briefly traded in positive territory early in the session.
US crude, gasoline and distillate stocks rose last week, the Energy Information Administration said on Wednesday. Crude inventories rose 6.8 million barrels in the week to May 31, compared with analyst expectations for a decrease of 849,000 barrels.
“The across-the-board inventory builds makes for a very bearish report,” said John Kilduff, a partner at Again Capital. A surge in imports and an increase in domestic production, he added, had boosted inventories, which “came despite strong demand for crude oil from refiners and gasoline from drivers.”
The rise in refinery runs has paled in comparison to the jump in imports, particularly waterborne imports to the Gulf and West Coasts, said Matt Smith, director of commodity research at ClipperData.
“The stock build does not help sentiment in the current market environment,” ING bank said.
Oil prices have fallen sharply on concerns about slowing demand, but won some respite on Tuesday after a global stockmarket rally on hopes the Fed may trim interest rates. Equities extended gains on Wednesday.
“Yesterday’s upswing on the back of rising stock markets was halted by an unexpectedly sharp rise in US crude oil and product stocks,” Commerzbank said.
The oil market has been weighed down by concerns about slowing global growth due to the US-China trade war and President Donald Trump’s threats last week to place tariffs on Mexican imports if more was not done to halt illegal immigration across the Mexican border.
To prevent oversupply and prop up the market, the Organization of the Petroleum Exporting Countries, together with allies including Russia, has withheld some production since the start of the year.
The group will set its policy when it meets later this month or in early July.
Meanwhile, Russia and Saudi Arabia’s energy ministers, Alexander Novak and Khalid Al-Falih, will chair a trade and economy commission in Moscow on June 10, the Russian Energy Ministry said on Wednesday.
Novak and Al-Falih will discuss bilateral trade and economic cooperation, joint projects in energy and agriculture, the ministry said.