A spike in crude stockpiles in the United States and record Saudi production are sending oil prices tumbling.
On Wednesday, oil prices slumped 6 percent after closing at their highest this year, scuttling talk of a sustained recovery .
US crude oil inventories surged 10.95 million barrels — three times more than expected — to a modern-day record 482.39 million last week, Reuters reported, citing government data.
It was the biggest one-week increase since 2001. Stockpiles in Cushing, Oklahoma, rose by 1.2 million barrels, much more than expected.
The data added to earlier losses triggered by comments that Saudi oil production rose to 10.3 million barrels per day (bpd) in March, the highest monthly total on record.
Brent May crude fell US$3.55, or 6 percent, to US$55.55 a barrel. US May crude fell US$3.56, or 6.6 percent to US$50.42 after closing at nearly US$54 a barrel on Tuesday, the highest close since Dec. 30.
The US data was “very bearish”, said John Kilduff, partner at Again Capital LLC in New York.
The rise in crude stocks was fueled in part by a 869,000 bpd increase in imports.
Gasoline inventories rose 817,000 barrels, compared with analysts’ expectations for a one million-barrel drop as refiners increased capacity utilization.
Oil’s rally earlier this week was built in part on initial reports of a very small rise in Cushing inventories last week.
Late on Tuesday they got a further jolt when Saudi oil minister Ali al-Naimi said the kingdom is ready to “improve” prices but only if producers outside the Organization of the Petroleum Exporting Countries (OPEC) join the effort.
Iraq and Libya also increased their output for March, further adding to OPEC production which came to about 31.5 million bpd last month, according to analyst Olivier Jakob of Swiss-based Petromatrix.
“With such a level of OPEC production it will be difficult to escape large stock-builds throughout the year,” he said in a note.
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