Oil tumbles on U.S. inventory builds; best month since April
By Barani Krishnan
NEW YORK (Reuters) - Oil prices fell 3 percent or more on Wednesday, paring their big gains for August, after government data showed a large surprise weekly build in U.S. crude and distillate stockpiles and a smaller-than-expected drawdown in gasoline.
Crude futures rose as much 11 percent in August, posting their best monthly return since April, helped by speculation that the Organization of the Petroleum Exporting Countries and other oil producers might agree to curb output at September talks in Algeria.
But oil also fell this week as the dollar rallied and expectations for an OPEC-led production freeze fizzled. Wednesday's supply-demand data from U.S. Energy Information Administration (EIA) could herald a more bearish trend, analysts said.
The EIA said crude stockpiles rose for a second straight week, building by 2.3 million barrels last week, compared with analysts' expectations for a rise of 921,000 barrels.
Distillate stocks, which include diesel and heating oil, unexpectedly rose 1.5 million barrels, while the gasoline inventory drop of 691,000 barrels was about half the drawdown forecast. [EIA/S]
"I would call this the trifecta of bearish news," said Tariq Zahir, a trader in WTI timespreads at Tyche Capital Advisors in New York.
"We should be getting draws for this time of year. Not only are we getting shocking builds, we're also being squeezed by the bullishness of the U.S. dollar and a hurricane season that's had very little impact thus far on actual crude production."
Brent crude futures settled down $1.33, or 2.8 percent, at $47.04 per barrel. It rose nearly 11 percent for August. Continued...