NEW YORK (Reuters) - Oil prices fell about 2 percent to three-week lows on Wednesday as the U.S. government reported a bigger build than expected in crude stockpiles, although significant drawdowns in gasoline and distillates prevented a steeper slide in crude futures.
U.S. crude oil inventories rose 8 million barrels last week, the government-run Energy Information Administration (EIA) said.
The build was more than double the 3.9 million barrels forecast by analysts in a Reuters poll. It was also above the 7.1 million build reported by industry group American Petroleum Institute.
Oil prices extended losses briefly on the build, but came off their lows on a drop of 1.5 million barrels in gasoline stocks also reported by the EIA. Stocks of distillates, which include diesel, fell by 2.6 million barrels.
The drop in gasoline and distillate stocks came despite a pickup in refinery runs, which should have translated to more products.
The Reuters poll had forecast an inventory decline of 900,000 barrels for gasoline and 1.3 million for distillates.
“The products draw is providing a bullish tilt to the market,” said Matt Smith, analyst at energy consultancy and database Clipperdata.
U.S. crude CLc1 settled down $1.09, or 2.4 percent, at $45.20 a barrel. It hit a three-week low of $44.86 earlier.
Global oil benchmark Brent LCOc1 finished down 86 cents, or 1.8 percent, at $47.85 a barrel, after hitting an early October low of $47.50.
Some analysts were skeptical of how much support gasoline could offer to crude. Gasoline prices RBc1 settled up slightly after the EIA report.
“The bottom line is what’s happening in products is more of a function of better cash markets, not a change in fundamentals,” said Scott Shelton, energy broker and commodities specialist at ICAP.
Lagging oil demand from China was a bigger factor, veteran oil analyst Jim Ritterbusch said. “We still see a significant slowing in the Chinese growth path as a longer-term item that will eventually translate to a broad-based ‘risk-off’ environment.”
Mercuria Chief Executive Marco Dunand said he expected only a modest price rise even if the oil market balanced or went into deficit in 2016 as non-OPEC producers reduced supply.
“By the end of next year, we might be more likely to be in a $55-type range, to $60 by 2017,” Dunand told the Reuters Commodities Summit.
Torbjorn Tornqvist, chief executive at trading house Gunvor, said he did not expect the oil price to rise beyond normal volatility levels at least until mid-2016.
Additional reporting by Amanda Cooper and Christopher Johnson in London and Keith Wallis in Singapore; Editing by Chris Reese, David Gregorio and Paul Simao