Oil Drops as U.S. Inventories Build Most in 14 Years
Oil prices dived 6 percent on Wednesday after closing at their highest this year, as a mammoth rise in U.S. crude stockpiles and news of record Saudi oil production scuttled talk of a sustained recovery.
U.S. crude oil inventories surged 10.95 million barrels - three times more than expected - to a modern-day record 482.39 million last week, U.S. government data showed, the biggest one-week increase since 2001. Stockpiles in Cushing, Oklahoma, rose by 1.2 million barrels, much more than expected.
The data added to earlier losses triggered by comments that Saudi oil production rose to 10.3 million barrels per day (bpd) in March, the highest monthly total on record.
Brent May crude fell $3.55, or 6 percent, to settle at $55.55 a barrel. U.S. May crude fell $3.56, or 6.6 percent, to settle at $50.42 after closing at nearly $54 a barrel on Tuesday, the highest close since Dec. 30.
The U.S. data were "very bearish," said John Kilduff, partner at Again Capital LLC in New York.
The rise in crude stocks was fueled in part by a 869,000-bpd increase in imports. Gasoline inventories rose 817,000 barrels, compared with analysts' expectations for a 1.0 million-barrel drop, as refiners increased capacity utilization.
U.S. RBOB gasoline futures fell 12.17 cents, or 6.54 percent, to settle at $1.7392 a gallon.
Oil's rally earlier this week was built in part on initial reports of a very small rise in Cushing inventories last week.
Late on Tuesday they got a further jolt when Saudi oil minister Ali al-Naimi said the kingdom stood ready to "improve" prices but only if producers outside the Organization of the Petroleum Exporting Countries (OPEC) joined the effort.
Oil's losses also came as two influential Federal Reserve officials said the U.S. central bank could still hike interest rates in June despite weak recent U.S. data and investor skepticism.
Minutes of the Fed's March 17-18 policy meeting, released on Wednesday, also show officials are eager to get the rate hike process started but are likely to go slow.
Iraq and Libya also increased their output for March, further adding to OPEC production, which came to about 31.5 million bpd last month, according to analyst Olivier Jakob at Swiss-based Petromatrix.
"With such a level of OPEC production it will be difficult to escape large stock-builds throughout the year," he said in a note.
(By Robert Gibbons; Additional reporting by Himanshu Ojha in London and Henning Gloystein and Florence Tan in Singapore; Editing by Dale Hudson, Louise Heavens and Lisa Shumaker)