Oil slides 4% on bearish US stock data

Oil prices fell more than four per cent on Wednesday after the US government stunned the market with a raft of bearish inventory oil data that added to renewed concerns over a global glut of oil.

US crude oil stockpiles fell less than expected last week, while distillate inventories rose the most since January and gasoline posted a surprise build, the Energy Information Administration (EIA) said.

The US inventory report reported added pressure to the already bearish market after the Paris-based International Energy Agency warned that a global supply glut was threatening market recovery.

"A surprising build in gasoline in the peak of US driving season and a very large build in heating oil will set the tone for lower prices as we go forward," said Tariq Zahir, a trader in crude oil spreads at Tyche Capital Advisors in New York.

"The products markets will continue to put weakness in the energy complex."

 

Brent crude was down $2.20, or 4.6 per cent, at $46.27 a barrel by 11:31 am EDT (1531 GMT). US crude fell $1.95, or 4.2 per cent, to $44.85.

Both crude benchmarks gained nearly five per cent on Tuesday on shortcovering and technical buying in a recovery from two-month lows hit earlier in the week. In Wednesday's session, US gasoline tumbled four percent too, while heating oil, a proxy for ultra low sulfur diesel, slumped nearly six per cent. The US government said crude inventories fell 2.5 million barrels last week, less than a 3 million-barrel drop forecast in a Reuters poll and contradicting trade group American Petroleum Institute's report late on Tuesday showing a crude build of 2.2 million barrels.

Distillate stockpiles, which include diesel and heating oil, rose 4.1 million barrels, versus expectations for a 256,000-barrel increase, the EIA data showed.

Gasoline stocks rose unexpectedly by 1.2 million barrels, compared with a 432,000-barrel drop forecast.