LONDON: Oil prices fell on Wednesday after an unexpected rise in U.S. crude stocks, adding to a picture of global oversupply that has dragged down values over the past year.
Industry data released on Tuesday by the American Petroleum Institute (API) showed crude inventories at the Cushing, Oklahoma, hub rose 2.3 million barrels last week, compared with analyst expectations for a decrease of the same volume. [API/S]
“The U.S. crude oil stocks build reported by the API last night is weighing on prices,” said Tamas Varga, analyst at London brokerage PVM Oil Associates.
U.S. crude CLc1 held above $50 a barrel, trading down 64 cents at $50.22 at 1140 GMT, 1.2 percent lower than the previous session’s settlement.
The August contract CLQ5, which expired on Tuesday, settled at $50.36 a barrel on its last day of trade, after slipping as low as $49.77 during the session, its weakest point in more than three months.
Brent crude LCOc1 was down 40 cents at $56.64 a barrel.
U.S. government crude stocks data to be released by the Energy Information Administration (EIA) at 1430 GMT is expected to shed further light on the build-up in inventories.
“Any indication of rising oil inventories in this week’s EIA weekly report is likely to weaken oil prices further,” analysts at ANZ said in a note to clients.
The global oil glut and subsequent price drop has thus far left OPEC members cold.
Delegates from members of the Organization of the Petroleum Exporting Countries (OPEC) indicated this week they expected the price drop to be short-lived and that they would not defer from a strategy of keeping output high to maintain market share.
Pressure has been rising on OPEC states to adjust production in the face of a rise in Iranian exports once Western sanctions are loosened.
Sharp falls in the Chinese stock market and fallout from the Greek debt crisis have also added to concerns about demand being strong enough to absorb high supply.
The global supply glut is also taking its toll on the products market. China’s exports of diesel in August are expected to reach their highest since at least 1999 as the domestic market cannot absorb high output from refineries, sources said.
OPEC kingpin Saudi Arabia has also been stepping up exports of diesel.