Crude prices came under pressure Wednesday after official data showed global oil stocks had increased, despite attempts by major producers to rebalance the market.
Brent crude, the global oil benchmark, fell 0.74% to $48.36 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were down 1.08% at $45.96 a barrel.
The International Energy Agency said stored oil in industrialized nations--a proxy for global supply-- grew by 18.6 million barrels in April. Inventories were 292 million barrels higher than the average over the past five years, said the agency, which advises governments on energy trends.
The increase came despite efforts by the Organization of the Petroleum Exporting Countries and a handful of external producers to drain stocks below five-year averages and reduce global output by 1.8 million barrels a month until March 2018.
"It was a very bearish report," said Commerzbank analyst Eugen Weinberg. "OPEC should rethink its strategy of trying to verbally and artificially drive oil prices higher, because the result of that strategy is very resilient U.S. production."
The market wasn't caught by surprise by the IEA data, as on Tuesday, the American Petroleum Institute reported that U.S. crude inventories rose 2.8 million barrels last week, while gasoline supplies increased by 1.8 million barrels.
Some traders still hope that Wednesday's readings from the U.S. government will show declining inventories for oil and gasoline, as numbers from the Energy Information Administration don't always match those from the API.
However, the inventory increases reported last week by the API were confirmed by the EIA a day later, sending oil prices slumping 5% last Wednesday.
OPEC is between a rock and hard place, say Commerzbank analysts.
The IEA expects global oil demand to rise by 1.4 million barrels a day in 2018--but non-OPEC supply alone is set to edge up by 1.5 million barrels.
"Should OPEC solve the problem of the overhang this year, it is just going to come back next year, so in any case their options are quite limited," said Mr. Weinberg.
Nymex reformulated gasoline blendstock--the benchmark gasoline contract--fell 1.15% to $1.48 a gallon on Wednesday. ICE gasoil changed hands at $428.75 a metric ton, down $2.75 from the previous settlement.
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Oil prices tumbled to the lowest level in seven months Wednesday, as high oil inventories continued to erode confidence in the ability of major producers to ease a global supply glut.
The U.S. Energy Information Administration reported a smaller-than-expected decline in crude-oil stockpiles last week, pushing prices below $45 a barrel and to the lowest levels since November. Meanwhile, gasoline stockpiles rose unexpectedly, compounding concerns about low demand for oil products amid an oversupplied market.
Light, sweet crude for July delivery slid $1.73, or 3.7%, to $44.73 a barrel on the New York Mercantile Exchange, snapping a three-session winning streak and closing at the lowest level since Nov. 14. Brent, the global oil benchmark, fell $1.72, or 3.5%, to $47.00 a barrel.
Oil has fallen more than 16% this year, despite an agreement between the Organization of the Petroleum Exporting Countries and other major oil producers to limit production and cut down an overhang of crude in the market. In May, OPEC and 10 other crude-oil producers agreed to extend the deal to cut output by 1.8 million barrels a month until next March.
However, signs of persistently high crude inventories have derailed their efforts to boost prices.
According to Wednesday data from the EIA, crude-oil stockpiles decreased by 1.7 million barrels in the week ended June 9, falling short of expectations for a 2.6 million barrel drop from analysts and traders surveyed by The Wall Street Journal.
Meanwhile, stockpiles of oil products increased, with gasoline inventories rising by 2.1 million barrels and distillates building by 300,000 barrels last week. Analysts had forecast a 700,000 barrel decline in gasoline inventories and a 600,000 barrel rise in distillates.
That is "really confirming the fact from last week that demand is a lot lower," said Tariq Zahir, managing member of Tyche Capital Advisors. "It's been two weeks in a row of surprising unleaded gasoline builds. That doesn't happen at this time of year."
On Wednesday, the International Energy Agency said stored oil in industrialized nations -- a proxy for global supply -- rose by 18.6 million barrels in April. Inventories were 292 million barrels higher than the average over the past five years, said the agency, which advises governments on energy trends. The IEA expects global oil demand to rise by 1.4 million barrels a day in 2018 -- but non-OPEC supply alone is set to edge up by 1.5 million barrels.
"That just adds fuel to the fire about the lack of efficacy of those production cuts," said Gene McGillian, research manager at Tradition Energy.
Traders said the pessimism over the supply glut could put further pressure on prices, especially if inventory data doesn't show substantial progress toward rebalancing supply and demand in the next few months.
While oil prices traded between $48 and $55 a barrel at the beginning of the year, the market likely has adjusted to a new base range of about $43 to $49 a barrel, said Mark Waggoner, president at Excel Futures. "If we get to July. and nothing's changed, you could see it break $40," he said.
Gasoline futures fell 4.5% to $1.4327 a gallon and diesel futures fell 2.6% to $1.4102 a gallon.
--Jenny W. Hsu and Summer Said contributed to this article.
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(END) Dow Jones Newswires
June 14, 2017 16:47 ET (20:47 GMT)