Oil down 3 percent after surprise U.S. crude, gasoline builds

Wed Jul 27, 2016 3:23pm EDT
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By Barani Krishnan

NEW YORK (Reuters) - Oil prices tumbled 3 percent on Wednesday, with U.S. crude futures hitting three-month lows, as U.S. crude and gasoline stocks surged on weak demand during the peak summer driving season.

The U.S. Energy Information Administration (EIA) said crude stockpiles soared 1.7 million barrels last week, instead of falling 2.3 million barrels as forecast. Gasoline inventories rose 452,000 barrels, compared with analysts' expectations for a 40,000-barrel increase. [EIA/S]

Oil extended losses as the dollar .DXY rallied after the Federal Reserve left interest rates unchanged while citing diminished near-term risks to the U.S. economic outlook that meant a potential rate hike later this year.[FRX/]

U.S. West Texas Intermediate (WTI) crude futures CLc1 settled down $1, or 2.3 percent, at $41.92 a barrel. WTI's session low was $41.68, a level last reached on April 20.

Brent futures LCOc1 fell $1.40, or 3.1 percent, to settle at $43.47 a barrel. Brent earlier dropped to $43.33, the lowest since May 10.

Reuters data also showed that WTI and Brent had inched closer to their 200-day moving averages. Breaching those could open the door for more prices drops, traders said.

"We will likely break through the $40 levels in days and weeks to come," said Tariq Zahir, crude trader and portfolio manager at Tyche Capital Advisors in New York.

"The bottom line is the street has gotten it wrong as far as the oil markets achieving supply-demand balance this year."   Continued...

Part of an offshore drilling platform (R) is towed past a car carrier docked at Singapore port November 2, 2015. REUTERS/Tim Wimborne/File Photo