NEW YORK (Reuters) - The comeback rally in oil paused on Wednesday, with crude prices falling 5 percent or more after traders and investors were overwhelmed by the latest estimates for U.S. supply builds that came in nearly five times above market expectations.
Benchmark Brent oil fell below the psychological $60 support and U.S. crude traded not far above $50 after industry group American Petroleum Institute estimated a supply build of more than 14 million barrels last week. A Reuters poll had expected a growth of just about 3 million barrels for the week to Feb. 13. [API/S] [EIA/S]
Oil had rallied over the past month, with Brent rising 35 percent from a mid-January low on short-covering by traders fearing the market had hit bottom after a 60 percent price crash since June. Violence in Iraq and Libya, both important oil producers, added fuel to the rebound.
But Wednesday’s session showed that supply worries have gripped the market again.
“We have more supply coming from here with the refinery maintenance season, and that’s prompting some people at least to ask if the market has overstretched itself with the rebound,” said Tariq Zahir, managing member at Tyche Capital Advisors in Laurel Hollow in New York.
Crude stocks rose nearly 5 million barrels in the week ended Feb. 6, taking total U.S. inventories to a record high of nearly 418 million barrels. Official supply-demand data for last week, as well as updated inventory numbers, will be provided by the government on Thursday. [EIA/S]
Brent LCOc1 closed down $2, or 4 percent, its most in two weeks, at $60.53 a barrel. It slid further in post-settlement trade, touching a low of $59.25 by 5:09 p.m. EST (2205 GMT). On Tuesday, Brent had risen to $63, its highest this year, marking a 35 percent gain from a near six-year low of $45.19 set on Jan. 13.
U.S. crude CLc1 closed down $1.39, or 2.6 percent, at $52.14. It traded as low as $50.32 post-settlement.
Prices were down from the open, as celebrations for the Chinese Lunar New Year that stretches into the weekend thinned trade volumes in Asia.
The selloff picked up by afternoon following a fire and explosion at a gasoline processing unit in a refinery owned by Exxon Mobil (XOM.N) in Torrance, California, near Los Angeles. Gasoline and heating oil prices RBc1 HOc1 saw less losses compared to crude as traders reacted nervously to the incident.
Additional reporting by Robert Gibbons in New York, Jack Stubbs in London and Henning Gloystein in Singapore; Editing by Dale Hudson, David Goodman, Marguerita Choy, Christian Plumb, Andrew Hay and Chris Reese