Oil Slides as U.S. Supplies Sound `Alarm Bells' for Traders
(Bloomberg) -- Oil slid Wednesday as a report showed U.S. crude stockpiles swelled to their highest levels since 2017 while American production set a new record.
Futures in New York closed down 0.5 percent after the U.S. Energy Information Administration said oil inventories in the world’s largest economy rose by almost 10 million barrels last week, blowing by both analyst and industry estimates. Gasoline stocks also showed a surprise increase, undercutting signs of tightening supplies elsewhere.
Oil hit a six-month high last week as a U.S. vow to tighten sanctions on Iran amplified strife in Venezuela and production cuts by the rest of OPEC to pump less. Yet surging output in America -- now at an estimated 12.3 million barrels a day -- still threatens the rally.
“Amid this host of bullish catalysts is one deepening pocket of weakness -- U.S. oil stocks are swelling due to an upswing in crude inventories,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd. in London. “Glum alarm bells are ringing louder in the U.S.”
Prices also slipped as U.S. factory activity fell to a two-year low and an attempted uprising against Venezuelan President Nicolas Maduro appeared to fizzle.
West Texas Intermediate futures for June delivery declined 31 cents to $63.60 a barrel on the New York Mercantile Exchange. Prices in April were the calmest since August.
Brent for July settlement was 62 cents lower at $72.18 a barrel on the London-based ICE Futures Europe exchange.
U.S. stockpiles have consistently exceeded expectations recently, rising in five of the last six weeks. Along with the U.S. shale boom, a slowdown in refineries due to spring maintenance, weather problems and accidents has left more crude building up in American storage tanks, which are watched closely by investors around the globe. Imports also rose to their highest since February, the EIA found.
“It was kind of a death by a thousand cuts," said Matt Sallee, a portfolio manager who helps oversee $16 billion in energy investments at Kansas-based Tortoise. “We were expecting a build, but this was much larger than people had seen."
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