By Jessica Resnick-Ault
NEW YORK (Reuters) – Oil prices fell on Wednesday, with West Texas Intermediate crude futures (WTI) dropping to its lowest since January after U.S. crude inventories unexpectedly surged, adding to concerns about slowing global growth.
Futures strengthened slightly early in the session and then plunged after U.S. inventory data was released.
Brent futures settled down $1.34, or 2.2%, at $60.63 a barrel. WTI ended $1.80, or 3.4%, lower at $51.68 a barrel. During the session, WTI touched a low of $50.60 a barrel, its lowest since Jan. 14.
U.S. crude, gasoline and distillate stocks rose last week, the Energy Information Administration said on Wednesday. Crude inventories rose 6.8 million barrels, compared with analyst expectations for a 849,000-barrel drawdown, to their highest since July 2017 and about 6% above the five year average for this time of year.
“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 a increase in domestic production boosted inventories, he said. Net U.S. crude imports rose last week by 1.1 million barrels per day, while crude production added another 100,000 bpd to a new peak at 12.4 million bpd, EIA data showed.
“The inventory gains came despite strong demand for crude oil from refiners and gasoline from drivers,” he said.
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 stock market 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 U.S. crude oil and product stocks,” Commerzbank said.
(Graphic: U.S. crude inventories, weekly changes since 2017 png link: https://tmsnrt.rs/2XlX17b).
The oil market has been weighed down by concerns about slowing global growth due to the U.S.-China trade war and President Donald Trump’s threats last week to place tariffs on Mexican imports.
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.
Underlining concerns about oversupply, the head of oil giant Rosneft Igor Sechin said on Tuesday that Russia should pump at will and that he would seek compensation from the government if cuts were extended.
A Gazpromneft official said Russian oil companies are ready to boost output if the supply cuts are eased.
Russia’s average oil output was 10.87 million barrels per day (bpd) on June 1-3, down from an average of 11.11 million bpd in May, two sources familiar with official data said.
The decline follows the discovery in mid-April of contaminated Urals crude in the Druzhba pipeline to Europe.
(Graphic: Russian, U.S. & Saudi crude oil production png link: https://tmsnrt.rs/2EUHeFO).
(Additional reporting by Aaron Sheldrick in TOKYO and Ahmad Ghaddar in London; Editing by Marguerita Choy)