Oil fell about 3 percent Wednesday as traders and investors ignored a fifth straight weekly decline in U.S. crude stockpiles to focus instead on a big build in distillates, including diesel, as the peak season for U.S. road travel got under way.
Glum sentiment ahead of Friday's meeting of the Organization of the Petroleum Exporting Countries also weighed on the market. OPEC, which pumps more than a third of the world's oil, is expected to reject any calls for output cuts and it instead continue to produce about 2 million barrels per day above demand.
U.S. crude inventories fell 1.95 million barrels last week, more than the 1.7 million forecast by analysts in a Reuters poll, a report from the government-run Energy Information Administration showed.
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Crude stocks at the Cushing, Oklahoma, delivery hub for U.S. oil also fell, along with gasoline stocks.
But distillate stockpiles, which included diesel and heating oil, rose by 3.8 million barrels, almost four times above the 1.1-million-barrel build forecast.
Oil prices, already volatile from the combination of a flighty dollar and the bearish mood over OPEC, briefly cut losses on the EIA report before heading lower.