Oil prices tumbled on Wednesday, with U.S. crude falling about 3 percent, after an unexpectedly large inventory build in the world's biggest oil consumer renewed worries about oversupply.
Continue Reading Below
The U.S. Energy Information Administration (EIA) reported that crude inventories rose 2.5 million barrels last week, versus analysts' forecasts for a draw of 500,000 barrels.
Gasoline and distillate stocks also rose, the EIA said, driving down oil prices that had mostly risen in the past two weeks on speculation of an output freeze by major producers led by OPEC.
U.S. West Texas Intermediate (WTI) futures were down $1.44, or 3 percent, at $46.66 a barrel by 12:33 p.m. EDT (1633 GMT).
Brent crude futures fell 98 cents, or 2 percent, to $48.98.
"I cannot continue to stress that at this time of year we are supposed to be getting draws," Tariq Zahir, oil trader at Tyche Capital Advisors in New York, said, referring to the summer inventory drawdowns expected for crude.
Continue Reading Below
"But instead, we're seeing a build in every single aspect that's quite eye opening. The Street has gotten it wrong again, with predictions that you'll start getting rebalancing of supply-demand in the third quarter."
Gasoline futures were the only bright spot in the oil complex on Wednesday, trading higher after a spate of refinery outages and on concerns about a possible hurricane headed towards the U.S. Gulf Coast where many oil and gas installations are located.
Crude futures have swung from bear to bull market territory this month as renewed worries of an oil glut were subdued by speculation that the Organization of the Petroleum Exporting Countries will agree to an output curtailment with non-members led by Russia at a meeting in Algeria next month.
A similar production freeze idea failed in April and analysts remain skeptical it will work now as some OPEC members keep pumping at high levels even while touting the plan.
"There is currently a race to print any freeze headlines but we have not yet seen strong substance behind them," said Olivier Jakob, managing director at PetroMatrix, an energy consultancy in Zug, Switzerland.
That could lead to more market volatility, some say.
"While we can envision WTI slippage to around the $45 mark next week, we feel that OPEC prattle regarding a possible cohesive effort to restrain production will continue to encourage an influx of speculative capital on price pullbacks of around $2-$3 from yesterday's settlement," said Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Associates.
(By Barani Krishnan; Additional reporting by Karolin Schaps in LONDON and Mark Tay in SINGAPORE; Editing by Alistair Bell and Meredith Mazzilli)