Oil prices dropped to their lowest settlement in seven months Wednesday, after U.S. government data showed a smaller-than-expected weekly decline in domestic supplies and an increase in gasoline stockpiles and crude production.
“In the midst of summer driving season and typical high demand period the [supply] build in products shows overall weakness,” said John Macaluso, an analyst at Tyche Capital Advisors.
Prices had already been trading lower in the wake of a report from the International Energy Agency which that warned the global oil glut will persist this year despite efforts to curb supply.
July West Texas Intermediate crude
fell $1.73, or 3.7%, to settle at $44.73 a barrel on the New York Mercantile Exchange. That was the lowest settlement since Nov. 14, according to data from Dow Jones. August Brent crude
on the ICE Futures Europe exchange lost $1.72, or 3.5%, to $47 a barrel, marking the lowest finish since late November.
The U.S. Energy Information Administration reported that domestic crude supplies fell by 1.7 million barrels for the week ended June 9.
The American Petroleum Institute late Tuesday had reported that crude inventories rose 2.8 million barrels last week, while analysts at Citi Futures forecast a decline of between 2 million and 3 million barrels.
The EIA’s reported decline in crude supplies was “a welcomed sight after [Tuesday’s] API report, but today’s report on the whole was still quite bearish,” said Troy Vincent, oil analyst at ClipperData. “The small draw to crude stocks was more than offset by the growth in gasoline inventories alone.”
Gasoline stockpiles rose 2.1 million barrels, while distillate stockpiles edged up by 300,000 barrels last week, according to the EIA.
‘Ongoing concerns about product demand is spooking the bulls, at a time that gasoline demand should be ratcheting up and driving on bigger crude draws.’
Matt Smith, director of commodity research at ClipperData, blamed the “solid build to gasoline inventories” for the big drop in oil prices. “Ongoing concerns about product demand is spooking the bulls, at a time that gasoline demand should be ratcheting up and driving on bigger crude draws.”
On Nymex, July gasoline
shed 6.7 cents, or 4.5%, to end at $1.433 a gallon, while July heating oil
fell 3.8 cents, or 2.6%, to $1.410 a gallon. Both contract settled at their lowest since November.
Total domestic production also climbed by 12,000 barrels to 9.330 million barrels last week, after posting a decline a week earlier, according to the EIA.
“With U.S. shale producers continuing to demonstrate robust production growth, we remain concerned the window for net draws in the U.S. in [fiscal year 2017] is too narrow for total inventories to normalize,” said Chris Kettenmann, chief energy strategist at Macro Risk Advisors.
Meanwhile, a monthly report from the IEA Wednesday said the world’s oil oversupply will remain in place through 2017, as efforts by the Organization of the Petroleum Exporting Countries to restrain petroleum production have hit a wall in the U.S.
Also see: OPEC oil production rose in May
But not all recent reports were bearish. BP PLC
said its latest research report that global crude-oil production in 2016 saw its slowest percentage growth in seven years, as non-OPEC output marked its biggest drop in nearly 25 years.
Also on Nymex, natural-gas prices fell to its lowest finish since March, ahead Thursday’s EIA update on supplies of the fuel. July natural gas
lost 3.3 cents, or 1.1%, to $2.933 per million British thermal units.
—Carla Mozée contributed to this article