Oil prices slid more than 3 percent on Wednesday after the US government reported an unexpected increase in inventories of crude and gasoline, fanning fears that output cuts by major world oil producers have not drained the global crude glut very much.
Crude stocks in the US grew 3.3 million barrels to 513 million barrels, according to the US Energy Information Administration (EIA). That confounded forecasters who had predicted a drop of 3.5 million barrels, especially a day after preliminary data from the American Petroleum Institute (API) indicated an even bigger drop.
Gasoline inventories also unexpectedly rose, imports increased, and exports dropped, the EIA data showed.
US crude futures fell 4.3 percent, or $2.04 a barrel, to $46.16 a barrel, as of 11:18 a.m. EDT (1518 GMT). Crude slid to its lowest level since May 9, with US benchmark futures down more than 10 percent in 10 days of trading.
Brent crude prices were at $48.40 per barrel, down 3.4 percent, or $1.72 a barrel.
Gasoline futures tumbled 3.6 percent to $1.4969 a gallon, the lowest since May 10, as rising inventories fed worries about weak demand. Overall gasoline demand is down 0.7 percent for the past four weeks from a year ago, the EIA said.
“Flagging gasoline demand continues to bedevil the market. With gasoline currently the seasonal leader of the complex, its weakness is dragging everything down,” said John Kilduff, a partner at Again Capital in New York.
Prices slid even as some in the market remained concerned about the move by members of the Organization of the Petroleum Exporting Countries (OPEC) to cut diplomatic and transport ties with Qatar, an OPEC member that had agreed to cut only about 30,000 barrels per day (bpd) as part of OPEC agreement to reduce output.
However, analysts saw a risk that the ongoing row in the Middle East could weaken the production cut agreement. Some were already concerned about rising production from Libya and Nigeria, which are exempt from the agreement.
OPEC has pledged to cut almost 1.8 million bpd to help reduce global inventories.
Royal Dutch Shell lifted force majeure on exports of Nigeria’s Forcados crude oil, bringing all the country’s oil exports fully online for the first time in 16 months.
Analysts said Qatar’s isolation caused trade disruptions that offered some short-term support for oil prices.
“Port restrictions on Qatari flagged vessels are going to cause loading disruptions,” said Jeffrey Halley, an analyst at brokerage OANDA.
Wall Street slips as oil weighs
US stocks slipped in early afternoon trading on Wednesday, weighed down by a fall in oil prices, while caution reigned ahead of Thursday’s major political and economic events.
A decline in oil prices due to an unexpected rise in US crude inventories took a toll on the energy sector, which dropped 2.1 percent.
Exxon’s 0.7 percent fall and Chevron’s 1.3 percent fall were among the biggest drags on the S&P 500 and the Dow.
Investors are also keeping a watch on Britain’s general election, the European Central Bank’s (ECB) policy meeting and former FBI Director James Comey’s testimony before a Senate panel on Thursday.
The election could determine whether the country has a smooth or hard exit from the EU.
“If the Conservative party extends its majority, markets will be pretty calm but anything less than that is going to have people worried about how we approach the Brexit negotiation,” said Luke Hickmore, a senior investment manager at Aberdeen Asset Management.
Comey’s first public appearance since he was fired by US President Donald Trump might shed more light on a probe by the FBI into alleged Russian meddling in last year’s US presidential election.
Any damaging revelation in Comey’s testimony could dampen already flagging momentum for Trump’s pro-business fiscal agenda.
“I think the Comey news led to an initial surprise but the rebound was equally swift,” said Liz Ann Sonders, chief investment strategist at Charles Schwab & Co.
“I am not sure that unless Comey says something completely shocking or he suggests something that there is no way the House cannot consider obstruction of justice ... aside from that I do not see his testimony as market moving.”
The ECB will also hold its policy meeting on Thursday and is expected to reiterate its plan to extend the money-printing scheme at least until the end of the year.

Source: Arab News