Oil futures dropped after the Energy Information Administration announced the largest build in US crude stocks for the last 14 years.
Crude stocks increased by 10.1 million barrels to 397.9 million, the highest level for this time of the year for around 80 years, as reported by the EIA. The increase is much more that the 2.6 million barrels predicted by traders.
According to Reuters US crude dropped more than 3% after the announcement and tumbled $1.51 trading at $46.24. The global benchmark Brent also dropped 61 cents trading at $48.42.
Eli Tesfaye, senior market strategist at RJO Futures said that the market was waiting for a catalyst like the EIA report to break out negative or positive.
Tesfaye said, “There’s no factor right now stabilizing this market. There’s definitely a race to the bottom here.”
The increase in supplies for crude is mainly due to the unexpected drop in refinery utilization, as reported by analysts.
Senior vice president at Herbert J. Sims & Co., Donald Morton was quoted by The Wall Street Journal as having said, “That’s an enormous cut in runs. We’ve cut now almost 9% in refinery utilization in the last two weeks- that’s a lot. That’s a huge number.”
The drop in the utilization is because of scheduled maintenance and unscheduled outages, according to to president of Lipow Oil Associates, Andy Lipow.
Lipow said, “I fully expect that crude-oil inventory will continue to rise through the end of March. At this rate, we’ll have more that adequate supplies going into the summer driving season, which will benefit the consumer.”
Gasoline supplies climbed by less than expected in the week while stocks of heating oil and diesel fuel among other distillates dropped unexpectedly.
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