HOUSTON -Oil prices tumbled more than 1.5 percent on Wednesday on a bigger-than-expected rise in U.S. crude inventories and record production in the world’s biggest producer, along with mounting worries about demand in Asia.
Brent futures settled down $1.29, or 1.6 percent, at $81.18 a barrel. U.S. West Texas Intermediate crude (WTI) fell $1.60, or 2 percent, at $76.66.
WTI’s front month contract was also lower than the second month, or in contango, for the first time since July. Prices for oil six months ahead also looked poised to rise above front month contract.
U.S. crude stocks rose by 3.6 million barrels last week to 421.9 million barrels, according to the U.S. Energy Information Administration (EIA), far exceeding analysts’ expectations in a Reuters poll for a 1.8 million-barrel rise.
The weekly government data, which was not published last week due to 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 does not think Saudi Arabia can cut more output to boost prices.
Top oil exporters Saudi Arabia and Russia, part of OPEC+, the Organization of the Petroleum Exporting Countries and allies, said this month they would continue with their additional voluntary oil output cuts until year end.
READ: OPEC+ maintains output reduction to boost oil prices
U.S. gasoline stocks showed strong demand with a surprise draw of 1.5 million barrels last week. Diesel inventories fell more than expected at 1.4 million barrels.
The International Energy Agency on Tuesday joined OPEC in raising oil demand growth forecasts for this year, despite projections of slower economic growth in many major countries.
China’s oil refinery throughput eased in October from the previous month’s highs as industrial fuel demand weakened and refining margins narrowed. Still, its economic activity perked up in October as industrial output increased at a faster pace and retail sales growth beat expectations.
Japan’s economy contracted in July-September, snapping two straight quarters of expansion on soft consumption and exports.
READ: Japan’s economy contracted in Q3 as demand waned
U.S. retail sales fell in October for the first time in seven months.
European Union diplomats said Russian oil tankers are not targeted in the European Commission’s proposal for tightening implementation of a price cap on the country’s crude oil.
Earlier, the Financial Times reported that Denmark will be tasked with inspecting and potentially blocking Russian tankers sailing through its waters under new EU plans as a way of enforcing a $60 per barrel price cap on Moscow’s crude.