Oil drops on large inventory increase, profit taking

NEW YORK — Oil prices fell on Wednesday, after official data showed a larger-than-expected increase in US crude inventories and a surprise build in gasoline stocks.

US crude inventories rose by 3 million barrels for the week ending Feb. 23, compared with analyst expectations for a build of 2.1 million barrels. Gasoline stocks also rose surprisingly.

“We had another pretty sizable build, and with that it kind of seemed like this recent bull market had the carpet pulled out from underneath it,” said Phillip Streible, senior market strategist at RJO Futures in Chicago.

Brent crude futures fell for a second day after rising 6 straight sessions.

US West Texas Intermediate ( WTI) crude fell $1.37, or 2.17%, to settle at $61.64 a barrel. Most active Brent crude futures for delivery in May were down $1.79, or 2.7%, to settle at $64.73 a barrel.

The April contract settled down 85 cents, or 1.28%, at $65.78 a barrel ahead of expiration.

Prices briefly pared losses after the US Energy Information Administration ( EIA) released data showing crude production in December dipped to 9.95 million barrels, down 108,000 barrels per day ( bpd) from November.

Prices resumed their downward path after that report, in which the EIA also revised its November crude production figures upward to a record 10.057 million bpd.

“The market did attempt a late day rally but because it’s the end of the month, a lot of hedge funds decided to try and take some profits,” said Phil Flynn, analyst at Price Futures Group.

Soaring US production, which has risen by a fifth since mid-2016, has kept a lid on oil prices this year, even as the Organization of Petroleum Exporting Countries has maintained its supply cuts.

“We’ve got a lot more oil to produce and we’ll be through that 11 million barrel-per-day threshold much sooner than expected,” RJO’s Mr. Streible said.

The entire energy complex was led lower by gasoline futures after a surprise build in US gasoline stocks, which rose by 2.5 million barrels, compared with expectations for a 190,000-barrel drawdown.

The most active US gasoline futures fell as much as 3.1% to $1.9354 a gallon.

“In spite of refiners undergoing maintenance, they continue to process more crude compared to previous years adding to gasoline and diesel supply,” said Andrew Lipow, president at Lipow Oil Associates in Houston.

Prices were pressured earlier after three of the world’s top crude consumers — China, India and Japan — reported a slowdown in monthly factory activity. —