Oil settles at 2-week low on surprise US stock rise

NEW YORK — US crude on Wednesday slid nearly three percent on Wednesday, its biggest daily decline in more than two months, after a sharp rise in US inventories of refined fuel suggested demand may be flagging, while US crude production hit another weekly record.

US gasoline stocks rose by 6.80 million barrels and distillate inventories were up 1.70 million barrels, government data showed, both exceeding expectations in a Reuters poll. The surprise data hit prices of both crude and products in a market that was tilted bullish and vulnerable to a selloff, analysts said.

The Energy Information Administration data also showed US crude stocks fell 5.60 million barrels, more than expected. That was partially due to closure of the Keystone pipeline after a leak in South Dakota in mid-November, which cut flows to Cushing, Oklahoma. That line reopened Tuesday.

US West Texas Intermediate ( WTI) crude futures settled down $1.66, or 2.90%, to $55.96 a barrel. It marks the lowest close for the benchmark since Nov. 16 and the biggest one-day decline for WTI since Oct. 6.

Brent crude futures ended down 2.60%, or $1.64 a barrel to $61.22, for its lowest close since Nov. 2.

Gasoline stocks tend to build in December, but at 221 million barrels of inventory, stocks are slightly above the five-year average for this time of year.

“Gasoline inventories are also now building as demand eases back even in the face of decent export numbers. Gasoline futures have clearly broken technical support levels and ULSD ( diesel) futures are testing them,” said David Thompson, executive vice-president at Powerhouse, an energy-specialized commodities broker in Washington.

US crude production rose to 9.70 million barrels per day ( bpd), another weekly record, though short of all-time records reached in the 1970s. That increase may undermine efforts by the Organization of the Petroleum Exporting Countries (OPEC), Russia and other producers to cut supply. Those cuts, which were extended at a meeting last week for the whole of 2018, have helped lift Brent prices more than 40% since June.

Prices have slipped from November’s peak, which represented two-year highs.

US oil production has climbed by 15% since mid-2016 to 9.70 million bpd, close to levels of top producers Russia and Saudi Arabia.

“With US production, we’re still in the throes of seeing that go ever higher. There’s only going to be more production coming which is very problematic for OPEC, non- OPEC deal adherence,” said John Kilduff, partner at Again Capital in New York. —