U.S. Crude Turns Negative on Supply Build

OilReuters

U.S. crude futures fell almost 2 percent on Wednesday as a surprise build in stockpiles pushed the market back down toward the three-month low it touched the previous session.

The U.S. Energy Information Administration said inventories rose last week for crude, gasoline and distillates. That surprised market players a day after industry group the American Petroleum Institute had reported a draw of 1 million barrels. Analysts polled by Reuters had forecast a crude draw of 700,000 barrels.

Continue Reading Below

"We were not supposed to be building crude inventories in early July. This tells me the data will be additive to the macro-based selloff and perhaps make it worse," said David Thompson, executive vice-president at Powerhouse, an energy-specialized commodities broker in Washington.

Earlier this week, oil prices tumbled to three-month lows on worries about the impact of Greece's debt woes and China's stock market plunge on the world economy and fuel demand.

Oil prices also felt pressure from Iran's eagerness to seal a nuclear accord that will allow it to resume crude exports without sanctions into an already glutted global market.

U.S. crude's front-month contract was down 90 cents , or 1.7 percent, at $51.43 a barrel by 12:38 p.m. EDT (1638 GMT). It hit an early April low of $50.58 on Tuesday.

Brent crude fell 30 cents, or 0.6 percent, to $56.55.

Prices rose in European trading before reversing in New York, after the release of the stockpiles data.

"The forward WTI is making new lows and is starting to look cheap if you have a longer-term time horizon," Thompson said, referring to the widening discount between nearby and farther-dated in the benchmark U.S. West Texas Intermediate crude. <0#CL:>

In China, world's second-largest oil consumer, the stock market fell further after the country's securities regulator warned that investors were in the grip of "panic sentiment."

In Athens, Greece was given until end of the week to come up with sweeping reforms for loans that would keep it within the euro currency.

"Turmoil in China and Greece may put recent robust demand growth at risk," Morgan Stanley's oil analysts wrote.

In Vienna, nuclear talks between Iran and six global powers went beyond Tuesday's deadline, offering a glimmer of hope to market bulls fearing an onslaught of Iranian crude supply from sanctions likely to lifted with the deal.

"Those market participants who have been betting on a rapid Iranian return to the oil market are now likely to square their positions, which should lend short-term support to prices," said Carsten Fritsch, senior oil analyst at Commerzbank. (Additional reporting by Alex Lawler and Libby George in London and Henning Gloystein in Singapore; Editing by Dale Hudson and David Gregorio)