Oil prices sunk to a fresh six and a half year low after weekly US government inventory data reported an unexpected growth in the country’s crude inventories.
Light sweet crude for September delivery, due to expire, settled $1.83 or 4.3% lower at $40.80 a barrel on the New York Mercantile Exchange.
Based on the most active contracts, this is the lowest the US benchmark has settled since March 2009.
Brent for October delivery, the global benchmark, ended $1.65 or 3.4% lower at $47.16 a barrel.
The Energy Information Administration reported that crude stockpiles in the US grew by an unexpected 2.6 million barrels during the week ending August 14. Analysts polled by Reuters had expected the government agency to report a draw by between 1.5 million and 2.5 million barrels.
The reports stunned investors and traders on Wall Street who were expecting the agency to report a drop particularly after the American Petroleum Institute reported on Tuesday that crude inventories had fallen by 2.3 million barrels for the same period.
The report, which comes as the peak US driving season nears its end, the average weekly US output fell for the same period but by a paltry 0.4% with most analysts attributing the growth in stockpiles to increased imports from the OPEC countries.
“Clearly OPEC has produced a lot more than what people expected they would,” David Meaney, portfolio manager at BP Capital LP, told the Wall Street Journal.
“U.S. producers have been amazing in their resilience.”
Stockpiles are expected to continue to grow after BP unexpectedly shut down its Whiting Refinery in Indiana, the biggest in the Mid West, fro unscheduled repairs.
The outage at the 240,000 barrel per day refinery saw crude refinery utilization in the region fall by more than 92.2%.
“The outage is sufficient to push U.S. oil supplies higher over a three-week period,” Richard Hastings, strategist at Global Hunter Securities, told Market Watch.
“That will increase oil stocks at the Cushing, Okla.; delivery point for Nymex futures. BP’s Whiting refinery.”
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