Oil settles at $50.28, plunging to nearly 3-month low after US crude inventories rise for 9th straight week

Crude oil inventories up 8M barrels
Crude oil inventories up 8M barrels

Oil prices fell more than 5 percent on Wednesday, hitting roughly three-month lows, after the U.S. Department of Energy reported a much larger increase than expected in domestic crude inventories.

The build fed concerns that a supply glut could persist even as OPEC seeks to prop up prices with output curbs.

U.S. crude inventories rose by 8.2 million barrels in the last week, quadruple analysts' expectations for an increase of 2 million barrels, as refineries cut output and imports rose, data from Energy Information Administration showed.

Prices had weakened overnight after data from industry group the American Petroleum Institute (API) showed late on Tuesday inventories rose by more-than-forecast 11.6 million barrels last week.

Chevron CEO: Oil market is coming into balance
Chevron CEO: Oil market is coming into balance

U.S. West Texas Intermediate crude settled down $2.86, or 5.4 percent, at $50.28, marking the worst day for oil in 13 months. WTI struck its lowest level since Dec. 15.

Brent crude, the international benchmark, was down $2.89, or 5.2 percent, at $53.03 a barrel at 2:35 p.m. ET (1935 GMT). The contract earlier fell to its weakest price since Dec. 8.

U.S. gasoline futures turned negative after rising as much as 1.5 percent following EIA data showed the biggest weekly drawdown in stockpiles since 2011.

"This report runs the gamut in terms of extremes, with a huge 8.2 million barrel build to crude stocks tilted bearish, large draws to the products distinctly bullish," said Matt Smith, Director of Commodity Research at ClipperData.

"Crude stocks were bolstered by rebounding imports, while both gasoline and distillates draws were exacerbated by higher implied demand."

It was the ninth straight weekly rise in U.S. crude supplies. The market is also concerned about resurgent U.S. drilling activity.

On Tuesday, the EIA's latest monthly outlook forecast that U.S. crude production in 2017 would rise by 330,000 barrels per day to 9.21 million bpd, a bigger rise than previously forecast.

ConocoPhillips CEO: Oil lower for longer
ConocoPhillips CEO: Oil lower for longer

Oil prices have been supported by a supply cut that started on Jan. 1 by the Organization of the Petroleum Exporting Countries plus Russia and other non-members. Data has suggested high compliance with the deal.

Kuwait Oil Minister Essam Al-Marzouq said on Wednesday that OPEC's compliance with an oil output cut stood at 140 percent in February, while non-OPEC members compliance was 50-60 percent.

Total output reductions have exceeded 1.5 million barrels per day (bpd) out of almost 1.8 million bpd pledged, Saudi Energy Minister Khalid al-Falih said on Tuesday. He said the results exceeded low market expectations.

Also supporting oil prices, China's crude imports rose in February to the second-highest level on record.

Pressuring oil prices were expectations of a U.S. interest rate hike next week, which lifted the dollar against a basket of currencies, making greenback-denominated oil more expensive for holders of other currencies.

— CNBC's Tom DiChristopher contributed to this report.