Oil prices sold off Monday after a private data forecaster reported a jump in stored supplies at the main delivery hub in the United States.
The market chopped around much of the morning in directionless trading, but turned decisively negative after Genscape released a weekly report showing oil inventories in Cushing, Okla., storage tanks rising by nearly 1.5 million barrels, according to people who receive the private report.
Cushing inventories have been declining since hitting a record of nearly 67 million barrels in March, dropping by about 4% since then, and have fallen for the last two weeks in a row. If the Genscape report is accurate, it could send a bearish signal to a market that has been gaining momentum from evidence of strong demand and hope that the oversupply of oil is beginning to wane.
"If we got that kind of build that would be a shock," said Phil Flynn, an account executive at Chicago brokerage Price Futures Group. "That is the kind of number that would shake you up."
Official U.S. Energy Department inventory data are scheduled to be released Wednesday.
The U.S. oil benchmark was down 1.8% at $42.93 a barrel on the New York Mercantile Exchange, while the global Brent contract was down 1% at $44.66 a barrel on the ICE Futures Europe exchange.
Monday's reversal follows a 5% rally in the market last week to a 4 1/2 month high, according to Commerzbank. Those gains came amid a strike in Kuwait and hopes that the oil glut will begin to abate, overriding disappointment about the failure of major sovereign producers to agree on a production freeze.
Markets also were buoyed last week by signs that the global oil surplus is beginning to wane. The number of rigs drilling for oil in the U.S. dropped to 343, a fall for the fifth consecutive week, according to Baker Hughes.
The International Energy Agency also said last week that it expects production from the U.S., China, Russia, Mexico and Colombia to fall, helping to reset the supply-and-demand balance next year.
Still, the speed at which Iran and Libya ramp-up exports this year continues to be a blind spot for the market and could affect the rate of rebalancing.
Over the weekend, a company associated with the government running eastern Libya said it was preparing to export its first crude cargo, which could kick-start the country's return to the oil market. Oil exports from Libya have been erratic since the fall of Moammar Gadhafi in 2011.
This week, traders will be eyeing the Federal Reserve policy meeting for an outlook on the U.S. economy. The market largely expects the committee to keep the benchmark rate unchanged, but indications of future policy have an effect across markets, from oil to bonds.
In refined product markets, gasoline futures were down 0.8% at $1.5186 a gallon and diesel futures were down 1% to $1.2965 a gallon.
Jenny W. Hsu and Benoit Faucon contributed to this article.
By Jenny W. Hsu