US crude oil settled in a bear market on Wednesday and Brent lurched to a six-month low after stockpiles of US crude unexpectedly jumped by the most in five weeks to a fresh 22-month high, adding to pressure on prices.
West Texas Intermediate, the US crude marker, shed $1.80 to settle at $51.68 a barrel – the lowest since January, according to Refinitv data. The day’s slide pushed it into bear market territory, defined as a decline of 20 per cent or more from a recent peak. WTI is now 22 per cent lower than its April high of $66.30 a barrel.
Brent crude settled $1.34, or 2.2 per cent, lower at $60.63 a barrel and is edging towards a bear market. The global oil marker broke below the $60 a barrel level earlier in the day to hit its lowest since January.
Crude prices tumbled last month amid concerns the escalating trade war between the US and China could have a knock-on effect on the health of the global economy and weigh on demand for oil.
The moves on Wednesday came as data showed stockpiles of US crude climbed by 6.8m barrels last week to 483.3m – the highest level since July 2017, the Energy Information Administration said on Wednesday.
That was the biggest build in five weeks. Analysts expected a draw of 849,000 barrels, according to a Refinitiv survey. Meanwhile, inventories of gasoline, a product that oil is refined into, rose by 3.2m barrels, against expectations for a smaller 630,000 barrel build.
The report also showed America’s total stocks, which include crude, gasoline and diesel, grew by more than 22m barrels last week, the biggest jump in almost 30 years.
Lower oil prices risk undermining efforts by global producers, led by Opec and its allies outside of the cartel, to tighten the market through supply curbs. Ministers are due to meet in the coming weeks to decide whether to continue with the cuts policy.
Igor Sechin, Russian oil company Rosneft’s chief executive, this week questioned the logic of Russia curbing its output further, warning producers in the US could raise production and take its market share.
“Does it make sense [for Russia] to reduce [oil output] if the US immediately takes [our] market share?” Mr Sechin said according to the domestic Interfax news agency. “We have to defend our market share,” he said.
Oil prices have fallen despite geopolitical factors ranging from stricter US sanctions on Iran to an escalation of tensions in the Middle East.