Oil Slides After U.S. Stockpile Build; Greece, Iran in Focus

OilReuters

Oil prices slumped on Wednesday, with U.S. crude headed for its sharpest daily loss since early April, after the first rise in crude stockpiles in the United States in more than two months.

The dollar's rally on Greece's debt default, Iran's renewed efforts to reach a nuclear deal with the West to freely resume its crude exports, and signs of OPEC output at three-year highs, further weighed on the market.

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The U.S. Energy Information Administration (EIA) said crude inventories rose by 2.4 million barrels last week, the first weekly build since April and versus a 2-million-barrel draw forecast by analysts in a Reuters poll on Tuesday.

The EIA also said gasoline stockpiles fell by 1.8 million barrels, indicating strong demand for fuels from the peak U.S. summer driving season, even as crude inventories rose.

"The gasoline draw implies demand has picked up. But the overall feel is that we have more than enough crude and the market could be in a bearish tilt hereon with the Greece and Iran factors in play," said Tariq Zahir, oil trader and managing member at Tyche Capital Advisors in Laurel Hollow, New York.

Brent crude was down $1.55, or 1.7 percent, at $62.04 a barrel by 1:53 p.m. EDT (1753 GMT).

U.S. crude fell $2.48, or 4.2 percent, to $56.99. The last time slid as much in a day was on April 8.

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The sharper drop in U.S. crude also widened its discount towards Brent to above $5 a barrel, the biggest gap between them in three weeks.

The dollar rose 0.7 against the euro, making commodities denominated in the greenback less affordable for users of the single currency, as Greece became the first developed economy to default on an International Monetary Fund loan. A defiant Prime Minister Alexis Tsipras urged Greeks on Wednesday to reject an international bailout deal.

In Vienna, world powers and Iran held talks, extending an original June 30 deadline for a nuclear accord by a week.

"If the nuclear negotiations with Iran are brought to a positive conclusion, there is also the threat of additional oil reaching the market from Iran," said Carsten Fritsch, analyst at Commerzbank.

OPEC supply hit three-year peaks of 31.6 million barrels per day in June, a Reuters survey showed, and Iraqi exports stood at record peaks.

"With these strong growth rates, OPEC supply growth is now challenging non-OPEC supply growth," analysts at JBC Energy in Vienna wrote.

(By Barani Krishnan; Additional reporting by Robert Gibbons in New York,; Alex Lawler in London and Henning Gloystein in Singapore; Editing by W Simon and Meredith Mazzilli)