Oil prices were down more than 3 percent on Wednesday after the US government reported a crude build three times above analysts expectations to a record high for the sixth straight week, rekindling worries of a glut that threatened to reverse a two-month long rally on the market.
The US Energy Information Administration (EIA) said crude stockpiles rose 9.4 million barrels last week, not far from the 8.8 million build indicated by industry group American Petroleum Institute on Tuesday but way off the 3.1 million barrels expected by analysts in a Reuters poll.
“The data will do little to help oil bulls, given the monster build for crude inventories already at record high levels prior to this,” said Chris Jarvis, analyst at Caprock Risk Management in Frederick, Maryland.
US crude futures were down $1.25, or 3 percent, at $40.20 a barrel by 11:30 a.m. EDT (1530 GMT), after touching a session low at $40.06 on the EIA data.
Brent crude futures were off $1.04, or 2.5 percent, at $40.75, slipping to $40.61 earlier.
Weaker US equity markets, which have since the start of this year traded in tandem with oil, also weighed on oil, along with a stronger dollar that made commodities denominated in the greenback less affordable to holders of currencies such as the euro.
Crude prices had rallied about 50 percent over the past six months from 12-year lows, lifting US crude from around $26 and Brent from around $27.
While some of the gains were related to declining US oil production and strong demand for gasoline this year, the bulk of it was due to plans by OPEC and other major producers to freeze production at January’s high levels.
The EIA data was not entirely bearish, with gasoline stocks falling 4.6 million barrels, compared with the 1.5 million-barrel drop forecast. Demand for the motor fuel over the past four weeks also soared 7 percent year-on-year.
Crude stockpiles at the Cushing, Oklahoma, delivery hub — an important data point for the market — fell 1.3 million barrels, declining for the first time in seven weeks.
But overall focus remained on total crude stockpiles which hit record highs for a sixth straight week at 532.5 million barrels.
“The rally, in our opinion, has run its course for now and opportunities lay ahead for weakness especially in the spread market,” said Tariq Zahir, trader and fund manager at Tyche Capital Advisers in New York.
Source: Arab News