Oil prices tumbled 4% on Wednesday to their lowest settlements in nearly five months, weakened by another unexpected rise in U.S. crude stockpiles and by a dimming outlook for global oil demand.
Brent crude futures fell $2.32, or 3.7%, to settle at $59.97 a barrel, the international benchmark’s lowest close since Jan. 28.
U.S. West Texas Intermediate crude futures ended $2.13, or 4.0%, lower at $50.72 a barrel, its lowest settlement since Jan. 14.
The U.S. Energy Information Administration (EIA) reported domestic crude stockpiles rose unexpectedly for the second week in a row, climbing 2.2 million barrels last week after analysts had forecast a decrease of 481,000 barrels.
At 485.5 million barrels, U.S. commercial stocks were at their highest since July 2017 and about 8% above the five-year average for this time of year, the EIA said.
“Its definitely a market that is still in some disbelief of these inventory builds, and they’re not going to be able to look beyond it,” said Phil Flynn, analyst at Price Futures Group in Chicago. “It has been more difficult to guess what the EIA is going to add every week.”
The EIA on Tuesday cut its forecasts for 2019 world oil demand growth, which also pressured oil futures.
Trade tensions between the United States and China, the world’s two biggest oil consumers, also weighed on prices.
U.S. President Donald Trump on Wednesday said he had a feeling that a trade deal could be reached, while again threatening to increase tariffs on Chinese goods if they do not make a deal.
Hedge fund managers are liquidating bullish oil positions at the fastest rate since the fourth quarter of 2018 due to increasing fears about the health of the global economy.
Goldman Sachs said an uncertain macroeconomic outlook and volatile oil production from Iran and others could lead OPEC to roll over supply cuts.
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.
The energy minister of the United Arab Emirates, Suhail bin Mohammed al-Mazroui, said on Tuesday that OPEC members were close to reaching an agreement on continuing production cuts.
Algeria has floated an idea of increasing an oil supply cut by OPEC and its allies in the second half of 2019 as demand falters, OPEC sources said, although rolling over current output curbs is still the most likely scenario.
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