Oil Prices Drop on Surprise US Stockpile Build

Oil prices fell on Wednesday on worries that global supply is climbing as US inventories rose unexpectedly and Saudi Arabia and other big producers signalled that they may increase output, according to Reuters.

US crude inventories rose 2.1 million barrels in the week to June 1, the Energy Information Administration said, a surprise after analysts had forecast a decrease of 1.8 million barrels. Fuel inventories also rose.

“Oil prices are being clobbered by a surprise build to crude stocks as total imports jumped higher, blunting the impact of higher refinery runs,” said Matthew Smith, director of commodity research at ClipperData in Louisville, Kentucky.

US crude output hit a record of 10.8 million barrels a day in the week, according to the EIA’s weekly report. Rising production has prompted selling since global benchmark Brent LCOc1 climbed above $80 a barrel last month.

“The continuing increase in crude oil production is weighing on the market, and quite significantly compared to this time last year,” Andrew Lipow, president of Houston-based Lipow Oil Associates. US oil production is up 1.5 million bpd from a year earlier.

Brent was down 40 cents a barrel at $74.97 by 11:42 a.m. (1642 GMT) US light crude CLc1 was down 73 cents at $64.79, after touching a session low of $64.27 a barrel.