Oil prices fell to a three-week low on Wednesday after government data showed a steep rise in U.S. fuel inventories.
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Light, sweet crude for January delivery fell $1.66, or 2.9%, to $55.96 a barrel on the New York Mercantile Exchange, the largest one-day dollar drop since July. Brent, the global benchmark, lost $1.64, or 2.6%, to $61.22 a barrel, closing at a one-month low.
On Wednesday, the U.S. Energy Information Administration reported a build of 6.8 million barrels in gasoline inventories in the week ended Dec. 1, exceeding analyst expectations for a 1.7 million barrel increase.
While crude inventories dropped by 5.6 million barrels last week, the data raised concerns about gasoline demand in the U.S. and put pressure on energy markets across the board, analysts said.
"It does reinforce people's questions about how robust U.S. gasoline demand is," particularly around the holidays, said John Saucer, vice president of research and analysis at Mobius Risk Group. "From a seasonal point of view, it usually does pretty well."
Analysts noted that the oil market looked vulnerable following a build up of bullish bets ahead of a meeting between the Organization of the Petroleum Exporting Countries and other major producers last week.
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On Thursday, OPEC and 10 countries outside the cartel including Russia agreed to extend production cuts through the end of 2018, largely meeting analyst expectations.
"We were overdue a little bit of profit-taking and the build up in gasoline inventories was the perfect excuse to do just that," said Michael Hewson, chief market analyst at brokerage CMC Markets.
Meanwhile, the high level of stockpiles in the U.S. and increasing production from shale companies have threatened to undermine prices. According to the EIA, domestic production rose to a fresh weekly record last week, churning out more than 9.7 million barrels a day.
Weakness in gasoline and distillate markets could exacerbate selling in crude, said Mark Waggoner, president of Excel Futures.
"That has the potential to tip the balance of everything into a very bearish mode," Mr. Waggoner said. "It's too early to say this is the end of the longer-term bull trend, but it's getting very close."
Gasoline futures fell 3.3% to $1.6609 a gallon and diesel futures lost 2.7% to $1.8613 a gallon.
Christopher Alessi contributed to this article.
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(END) Dow Jones Newswires
December 06, 2017 15:42 ET (20:42 GMT)