Brent futures settled down $1.29, or 1.6 per cent, at $81.18 a barrel, U.S. WTI dropped $1.60, or 2 per cent, at $76.66
Oil prices dropped more than 1.5 per cent on Wednesday on a bigger-than-expected increase in U.S. crude inventories and record production in the world’s biggest producer, along with growing concerns about demand in Asia.
Brent futures settled down $1.29, or 1.6 per cent, at $81.18 a barrel. U.S. West Texas Intermediate crude (WTI) dropped $1.60, or 2 per cent, at $76.66.
WTI’s front month contract was also below the second month, or in contango, for the first time since July. Prices for oil six months ahead also looked set to rise above front month contract.
U.S. crude stocks increased 3.6 million barrels last week to 421.9 million barrels, as per the U.S. Energy Information Administration (EIA), far exceeding analysts’ expectations in a Reuters poll for a 1.8 million-barrel increase.
The weekly government data, which was not published last week because of systems upgrade, also showed U.S. crude production was holding at a record 13.2 million barrels per day that it hit in October.
U.S. supply activity is headwind for the market, and U.S. is a problem for OPEC+, said John Kilduff, partner at Again Capital LLC in New York, adding he doesn’t think Saudi Arabia can cut more output to boost prices.
Top oil exporters Saudi Arabia and Russia, part of OPEC+ said this month they would continue with their additional voluntary oil output cuts until year end.
U.S. gasoline stocks showed strong demand with a surprise draw of 1.5 million barrels last week. Diesel inventories dropped more than expected at 1.4 million barrels.
The IEA on Tuesday joined OPEC in increasing oil demand growth forecasts for this year, in spite of projections of slower economic growth in many major countries.
China’s oil refinery throughput eased in October from last month’s highs as industrial fuel demand weakened and refining margins narrowed. Still, its economic activity perked up in October as industrial output rose at a faster pace and retail sales growth beat expectations.