Oil slumps as big U.S. crude draw offset by large gasoline build
Global oil markets fell on Wednesday, with U.S. crude down as much as 3 percent after the bullish impact of lower crude inventories was offset by large gasoline builds that raised concerns about high autumn fuel supplies.Crude production was up 0.21%, the first rise in eight weeks.
Also weighing on crude were Colonial Pipeline's efforts to fix an outage on one of its lines that had been supporting prices of gasoline, and the larger oil complex, since Tuesday.
Brent, the global benchmark for oil, was down 85 cents, or 1.7 percent, at $48.23 a barrel by 12:27 p.m. (1627 GMT).
U.S. crude slumped by $1.25, or 2.7 percent, at $45.11. It had fallen 3.3 percent earlier.
Gasoline was down 1.3 percent after hitting two-week highs.
Crude prices had initially rallied nearly 2 percent, with Brent briefly breaking above $50 a barrel, after the U.S. government reported a drawdown of about 2 million barrels for a second week in a row.
"The crude numbers were not a big surprise in any way," said Tariq Zahir, managing member at Tyche Capital Advisors in Laurel Hollow, New York.
"A draw we did see but there was also a bigger-than-expected build in gasoline. The bottom line is we think any rallies, if we do see them, will be short lived and we will sell into them," said Zahir, an oil bear.
Analysts polled by Reuters had forecast a decrease of just 533,000 barrels last week. Industry group American Petroleum Institute had, meanwhile, projected a draw of 3.7 million barrels, larger than the numbers put out by the EIA.
The U.S. government agency also said gasoline stockpiles rose 1.4 million barrels, compared with the Reuters poll which called for a 819,000-barrel gain....MORE
On the demand side, a trend appears to be emerging:
Oil Continues Decline On Gasoline Build
Well duh, the refiners are drawing down oil in storage to make gasoline that they can't sell....
Gasoline Glut To Hit Refiners: Wood Mackenzie (CRAK)
....Which brings me to an oddity of yesterday's action: Most market participants focused on the drawdown of crude in storage but not so much on where the oil went....
"Oil logs biggest daily drop in almost 3 weeks"
As we said a few weeks ago, it's probably time to start watching the demand side of the equation.
Commodities: "Gasoline Prices May Fall Lower"