West Texas Intermediate oil declined for the second consecutive day on Wednesday because United States petroleum inventories reached a record high last week. Futures fell as much as 3.2 percent after the Energy Information Administration reported that stockpiles increased by 6.7 million barrels. Further indications of economic slowdowns in the U.S. and China contributed to the drop in oil futures; payroll processor ADP announced that U.S. employers added fewer new jobs than forecast in April and China’s manufacturing expanded at a weaker-than-anticipated pace in April.
Analysts surveyed by Bloomberg had only estimated a 1.1-million-barrel gain.
“The market is worried about the ADP number being weak and they are worried about the manufacturing numbers in China,” Price Futures Group senior market analyst Phil Flynn told the publication. “The concern is that supplies are going to exceed demand. The market is focused on the overwhelming supplies.”
Petroleum inventories rose to 395.3 million barrels during the week ending April 26, the highest level that has been recorded since records began in 1982, according to the EIA. Comparatively, the industry group American Petroleum Institute reported Tuesday that crude inventories increased by 5.18 million barrels last week. The API sources inventory data on a voluntary basis from operators of refineries, bulk terminals, and pipelines, and the federal government requires that reports be filed with the EIA for its weekly survey.
While oil stockpiles are at a record high in the U.S., daily output by the Organization of Petroleum Exporting Countries (OPEC) rose by 194,000 barrels per day to a level of 30.9 million barrels in April, according to a Bloomberg survey.
“With inventories at the levels they are at, it is a question of how much demand there is, and there is growing evidence of a slowdown in economic activity with even China weaker than expected,” CMC Markets analyst Michael Hewson told the publication. “The direction of travel on oil is down and I see no reason to change that view unless OPEC cuts production.”
On the EIA’s report, West Texas Intermediate — or WTI — for June delivery dropped $2.62, or 3.2 percent, to $90.50 per barrel on the New York Mercantile Exchange. In addition, the volume of all futures traded was 35 percent above the 100-day average for that time of day. Alongside WTI, Brent — the European benchmark for crude oil prices — for June settlement dropped $3.03, or 3 percent, to $99.34 per barrel on the London-based ICE Futures Europe exchange. Volume was 22 percent higher than the 100-day average. This price drop pushed Brent’s premium to WTI to $8.39, the narrowest gap since January 2012.
Gasoline stockpiles decreased by 1.82 million barrels last week, while distillate fuels, which include diesel and heating oil, rose 474,000.