Energy

US crude settles down 2.9% at $45.34 after largest crude stockpile jump on record

Crude oil inventories up 14.4M barrels
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Crude oil inventories up 14.4M barrels

Oil prices tumbled nearly 3 percent on Wednesday after a record weekly build in U.S. crude stocks added to worries of all-time highs in OPEC production that suggested little could be done to rein in a global glut.

Prices were little changed after the U.S. Federal Reserve said it would leave its interest rate policy unchanged.

The U.S. government's Energy Information Administration (EIA) said crude inventories rose by 14.4 million barrels for the week ended Oct. 28, versus analysts' expectations for a build of 1 million barrels. It was the biggest ever rise in U.S. crude stocks in a week, overwriting a 2012 record.

"This is very, very, very bearish. Nothing else in the report matters," said James L. Williams, energy economist at WTRG Economics in London, Arkansas.

The stunning build came as refineries cut output and U.S. crude imports rose last week by 1.99 million barrels per day. U.S. oil production also rose slightly to 8.522 million barrels a day.

$40 oil is coming: Dennis Gartman
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$40 oil is coming: Dennis Gartman

U.S. West Texas Intermediate (WTI) crude settled down $1.33, or 2.9 percent, to $45.34, having briefly dipped below $45. Brent crude was down $1.24, or 2.6 percent, at $46.90 by 2:36 p.m. ET (1836 GMT). Both contracts were at their lowest since Sept. 28.

The American Petroleum Institute said earlier that crude stockpiles rose by 9.3 million barrels. The API bases its inventory numbers on voluntary reporting by its members, while the EIA uses a much larger sample.

"The API's crude build of more than 9 million barrels that appeared long overdue from our vantage point is adding to a list of bearish items," said Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Associates.

Gasoline stocks fell by 2.2 million barrels, compared with analysts' expectations in a Reuters poll for a 1.1 million barrels drop. Distillate stockpiles, which include diesel and heating oil, fell by 1.8 million barrels, versus expectations for a 1.9 million barrels drop, the EIA data showed.

Crude prices have swung in recent weeks, with Brent hitting one-year highs of $53.73 and WTI 15-month peaks of $51.93 on OPEC plans to cut output before retreating as some members of the producer group resisted the move.

Rising production from members of the Organization of the Petroleum Exporting Countries (OPEC) also weighed on prices.

"We have increasing production from Libya and Nigeria helping to create more surplus. Also, all OPEC members are producing as much as they can to have a high base line to negotiate from at the OPEC meeting," said SEB chief commodities analyst Bjarne Schieldrop.

Oil prices likely lower as inventories build
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Oil prices likely lower as inventories build

Nigerian Oil Minister Emmanuel Ibe Kachikwu said on Tuesday that oil output had recovered to 2.1 million barrels per day. The West African country's Trans Niger Pipeline, one of two conduits to export Bonny Light crude, reopened on Oct. 28 after a month-long shutdown, a Shell spokeswoman said late on Tuesday.

Libya has doubled its output since mid-September and is currently producing about 590,000 bpd, state-run National Oil Corp said.

OPEC output likely reached another record high in October at 33.82 million barrels per day from a revised 33.69 million bpd in September, a Reuters survey on Monday showed, ahead of the Nov. 30 meeting where the group hopes to finalize cuts.

"Those who were hoping for some upside from any sort of production agreement appear to have had their hopes dashed," said Ric Spooner, chief market analyst at CMC Markets in Sydney. "It looks like there are speculative longs quitting the market."

Meanwhile, Saudi Aramco, the state-owned producer from Saudi Arabia, expects prices to rise in the first half of 2017 as the market returns to balance, Chief Executive Officer Amin Nasser said late on Tuesday.

Nasser also said that preparations for the oil giant's initial public offering are going well and it is still aims to list in 2018.

— CNBC's Tom DiChristopher contributed to this story.