(Reuters) Oil prices slid more than 3 per cent on Wednesday after the U.S. 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 United States grew 3.3 million barrels to 513 million barrels, according to the U.S. 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 indicated an even bigger drop.
Gasoline inventories also unexpectedly rose, imports increased, and exports dropped, the EIA data showed.
U.S. crude futures fell 4.3 percent, or $2.04 a barrel, to $46.16 a barrel, as of 11:18 a.m. EDT. Crude slid to its lowest level since May 9, with U.S. benchmark futures CLc1 down more than 10 percent in 10 days of trading.
Brent crude prices LCOc1 were at $48.40 per barrel, down 3.4 percent, or $1.72 a barrel.
Gasoline futures 1RBc1 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, partner at Again Capital in New York.
Prices slid even as some in the market remained concerned about the move by OPEC members Saudi Arabia and the United Arab Emirates to cut diplomatic and transport ties with Qatar, an OPEC member that had agreed to cut only about 30,000 barrels a day as part of Organization of the Petroleum Exporting Countries agreement to reduce output.
However, analysts saw a risk that rivalries between OPEC members 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 barrels per day (bpd) to help reduce global inventories.
Royal Dutch Shell (RDSa.L) 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, analyst at brokerage OANDA.
(Additional reporting by Scott DiSavino, Stephen Eisenhammer and Henning Gloystein; Editing by Louise Heavens and David Gregorio)