Oil down 3 percent on surprise U.S. crude build; Brent near 2004 low

Oil down 3 percent on surprise U.S. crude build; Brent near 2004 low

By Barani Krishnan

NEW YORK (Reuters) – Crude prices fell 3 percent on Wednesday, with Brent sliding toward 11-year lows, after an unusual build in U.S. stockpiles & signs Saudi Arabia will keep adding to the global oil glut.

Crude inventories in the United States, the world's largest petroleum producer, rose 2.6 million barrels last week, the U.S. Energy Information Admkinistration said. Analysts polled by Reuters had expected a draw of 2.5 million barrels.

p> Stockpiles hit record highs at the Cushing, Oklahoma delivery hub for U.S. crude's West Texas Intermediate (WTI) futures. Gasoline & heating oil moreover posted larger-than-expected stock builds.

"In all the years I have been doing this, I have never seen builds in the last week of December," said Tariq Zahir, crude futures trader at Tyche Capital Advisors in Long Island, New York.

"At least for tax consequence reasons, refiners always ramp up runs at the year-end, & there's a draw. This is a first for me."

Chris Jarvis, analyst at Caprock Risk Management in Frederick, Maryland, concurred. "This week's EIA data is just another bearish data point in a series of many that have dominated 2015 & will likely continue to do so heading into 2016."

"In short, not much the bulls can pull from & certainly the bears have plenty to sink their teeth into," Jarvis added.

Crude prices did not lose much after their initial decline on the data, with some traders citing thin volume.

"If crude holds here, it is still not a breakdown," said Jeffrey Grossman, futures dealer at BRG Brokerage in New York.

After settling higher on Tuesday, prices retraced some gains after the industry group American Petroleum Institute said its numbers showed a surprise build. The EIA numbers on Wednesday confirmed it.

The front-month in Brent, the global oil benchmark, was down $1.16 at $36.63 per barrel by 11:18 a.m. EST, less than $1 from a 2004 low hit last week.

WTI's front-month fell $1.22 to $36.65.

Crude prices have plunged two-thirds since mid-2014 as soaring output from the Organization of the Petroleum Exporting Countries, Russia & the United States created a global surplus of between half a million & 2 million barrels per day.

Ali al-Naimi, oil minister of OPEC leader Saudi Arabia, said the kingdom will not limit production, the Wall Street Journal reported.

Slowing demand growth, particularly in Asia, has weighed on prices. China's energy consumption in 2015 grew at its lowest since 1998, according to official news agency Xinhua.

(Additional reporting by Libby George in London; Editing by David Gregorio)

Commodity MarketsStocks & Offerings

Source: “Reuters”

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