Oil prices fell more than 2% on Wednesday, pressured by an unexpected rise in U.S. crude inventories and by a weaker outlook for global oil demand.
Brent crude futures, the international benchmark for oil prices, fell $1.36, or 2.2%, to $60.93 a barrel by 11 a.m. EDT (1500 GMT). U.S. West Texas Intermediate crude futures were down $1.39, or 2.6%, to $51.88 a barrel.
Oil futures extended losses after the U.S. Energy Information Administration (EIA) reported domestic crude stockpiles climbed last week by 2.2 million barrels. Analysts had forecast a decrease of 481,000 barrels.
Gasoline stocks also increased more than expected.
“The report was mostly bearish, given the sizeable crude oil inventory build,” said John Kilduff, a partner at Again Capital LLC in New York. “It was also impressive that gasoline inventories rose, despite very strong demand on the week.”
The EIA on Tuesday cut its forecasts for 2019 world oil demand growth and U.S. crude production.
Trade tensions between the United States and China, the world’s two biggest oil consumers, also weighed on prices. U.S. President Donald Trump said he was holding up a trade deal with China.
European shares pulled back from three-week highs on Wednesday as this month’s recovery rally ran out of steam on the back of soft Chinese factory activity and trade frictions.
Hedge fund managers are liquidating bullish oil positions at the fastest rate since the fourth quarter of 2018.
With the next meeting of the Organization of the Petroleum Exporting Countries set for the end of June, the market is looking to whether the world’s major oil producers will prolong their supply cuts.
OPEC countries and non-member producers including Russia, have limited their oil output by 1.2 million barrels per day this year to prop up prices.
Goldman Sachs said an uncertain macroeconomic outlook and volatile oil production from Iran and others could lead OPEC to roll over supply cuts.
“The sell off in recent weeks shows how vulnerable the market is and it may force Russia’s hand in extending the deal,” said Warren Patterson, head of commodities strategy at ING.