Oil prices fell after U.S. data showed an unexpected increase in oil stockpiles, breaking a two-month streak of falling levels of oil in storage.
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U.S. crude inventories rose by nearly 3.3 million barrels last week, according to the U.S. Energy Information Administration -- the first weekly increase since March 31. Analysts and traders surveyed by The Wall Street Journal were anticipating a 3.5 million barrel decrease in the amount of oil in U.S. storage tanks.
The unexpected buildup of supplies shook an already anxious market. Investors, many of whom have been burned by oil's bumpy ride to recovery, have been watching the U.S. storage figures each week for signs that the glut that has weighed on the market for nearly three years is dissipating.
U.S. crude futures fell $2.03, or 4.21%, to $46.16 a barrel after the EIA data were released. Brent, the global benchmark fell $1.72, or 3.43%, to $48.40 a barrel on London's ICE Futures Exchange.
Prices are on track for their biggest daily decline since May 25, when the Organization of the Petroleum Exporting Countries and other major exporters said they would extend their agreement to reduce output but didn't agree to deeper cuts that many market participants were hoping for. Prices have been languishing since then, and even the eight consecutive weeks of oil being drained from storage tanks hasn't been enough to convince increasingly skeptical investors that OPEC's efforts would be enough to bring supplies back into balance with demand.
The unexpected increase in stockpiles spooked many market participants, analyst said.
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"I think it's safe to anticipate a knee-jerk reaction and a pretty swift selloff," said John Saucer, vice president of research and analysis at Mobius Risk Group.
The increase in oil stockpiles last was driven by an uptick in imports, a decrease in exports and a pullback by refiners, which churned less oil into fuel last week.
"It's a crummy report," Mr. Saucer said. "It's a divergence from what we've been seeing, and it causes people to regroup and rethink."
Gasoline stockpiles also grew last week, breaking a four-week streak of declines with a 3.3 million barrel increase. The increase, which comes in the first full week of the summer driving season, is raising fears that demand will be tepid this summer and that U.S. drivers won't be of much help bringing down bloated stocks of oil and fuel.
"This is a pseudo disaster this early in refining season," said Bob Yawger, director of the futures division of Mizuho Securities USA.
If more gasoline is going into storage rather than into vehicles, refiners are likely to continue throttling back, buying less crude oil to make into fuel.
"The whole thing is a vicious cycle that is not really leaving a lot of room for upside," Mr. Yawger said.
Gasoline futures fell 5.61 cents, or 3.61%, to $1.4984 a gallon. Diesel futures fell 3.86 cents, or 2.63%, to $1.4276 a gallon.
--Neanda Salvaterra contributed to this article.
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(END) Dow Jones Newswires
June 07, 2017 12:31 ET (16:31 GMT)