A significant and surprising build in crude inventories Wednesday added more pressure to oil prices, with West Texas Intermediate futures under the key $100 level.
The U.S. Energy Information Administration said that crude oil supplies for the week ended March 7 rose by 6.2 million barrels, nearly three times what the market was expecting. In its survey and analysis, Platts called for a 2.3 million barrel build.
Tim Evans, energy futures specialist at Citigroup, says this number came in well above even the high end of estimates, which were at 4 million barrels, and surpassed last year's report for the same week (3.6) and the five-year average (4.5).
Crude prices were already trading lower ahead of the report on investor concerns over China's economy and its growth potential, after a recent string of negative data from the world's second largest oil consumer.
Traders said an additional factor impacting price volatility was an announcement from the Department of Energy that it authorized a test drawdown and sale of up to 5 million barrels of sour crude oil from the Strategic Petroleum Reserve.
Traders speculated that the test could be a proactive step by the administration over geopolitical events in Russia and Ukraine.
However in a statement, the DOE said the release is part of routine evaluation and that recent dramatic increases in domestic crude oil production have resulted in significant changes to the system that need to be assessed.
"By law, the Department of Energy is required to conduct continual evaluation of the Strategic Petroleum Reserve system's drawdown and sales procedures," said DOE spokesman Bill Gibbons.