Oil drops 5.1% in 5-week low

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Oil prices slid nearly 5 percent on Wednesday after the U.S. government reported an unexpected increase in crude inventories, fanning fears that output cuts by major world oil producers have not drained a global glut very much.

Crude stocks in the United States grew 3.3 million barrels to 513 million barrels, according to the U.S. Energy Information Administration (EIA). That confounded forecasters who had predicted a drop of 3.5 million barrels, especially a day after preliminary data from the American Petroleum Institute indicated an even bigger drop.

Gasoline inventories also unexpectedly rose, imports increased, and exports dropped, the EIA data showed.

Brent crude prices were at $48.27 per barrel at 2:35 p.m. ET (1835 GMT), down $1.85, or 3.7 percent. U.S. light crude prices were at $45.72 per barrel, down 5.1 percent.

Gasoline stocks rose by 3.3 million barrels, compared with analysts’ expectations in a Reuters poll for a 580,000 barrels gain. Distillate stockpiles, which include diesel and heating oil, rose by 4.4 million barrels, versus expectations for a 281,000 barrels increase, the EIA data showed.

The EIA data also showed a drop in gasoline demand of about a half million barrels a day, a surprising development given that the data reflected the start of the summer driving season following the Memorial Day holiday.

U.S. gasoline futures fell about 3.7 percent after the data was released.

Oil futures had already been lower earlier on Tuesday on renewed concerns about the efficacy of OPEC-led production cuts, as tensions rose within the export group over Qatar and U.S. output continues to grow.

The U.S. Energy Information Administration (EIA) said on Tuesday U.S. crude oil production could hit a record 10 million bpd next year, up from 9.3 million bpd now, putting it nearly on a par with top exporter Saudi Arabia. (CNBC)