U.S. crude prices plunged toward $46 a barrel on Wednesday after weekly government data left the oil market with virtually nothing to cheer.
West Texas Intermediate futures dropped more than 4 percent as stockpiles of oil in the United States surged by 3.3 million barrels in the week ended June 2, according to the Energy Information Administration. That confounded analysts' estimates for a 3.5 million-barrel decline.
WTI prices fell as far as $45.92, a four-week low, following the report.
The drop below $47 was a "big deal" said John Kilduff, founding partner at energy hedge fund Again Capital. The next level to watch is the March low just below $44 a barrel, struck after oil prices fell through a number of key technical levels, culminating in a flash crash to $43.76.
The bad news kept on coming below the headline figure. Gasoline stocks also jumped by 3.3 million barrels, more than five times the expected increase. Inventories of distillate fuels like diesel and heating oil rose by 4.4 million barrels, 15 times the anticipated rise.
U.S gasoline demand fell by about half a million barrels a day, despite the onset of the summer driving season after the Memorial Day holiday. The decline came after a string of reports in which demand rebounded, easing concerns about weaker-than-usual consumption earlier this year.
U.S. gasoline futures fell by about 3.7 percent after the report.
"The persistent problem is the gasoline demand in particular," Kilduff said. "With employment levels where they're at, we should be seeing much higher gasoline demand than we're getting. It's a bit of a conundrum."
Gasoline is the seasonal leader in the energy complex, so its decline will hold back gains for other commodities, he said.
The drop in gasoline demand renews concerns that oil prices could face headwinds later this year if refiners exit the summer with high fuel stockpiles.
"The fact of the matter is there's more than adequate gasoline to get through the summer driving season, and refiners continue to run at near-record throughputs, which will keep supplies from drawing precipitously," said Andrew Lipow, president of Lipow Oil Associates.
Wednesday's rise in U.S. stockpiles puts up another obstacle for OPEC and other petroleum-exporting countries, which have cut back their output in order to shrink global inventories by about 300 million barrels to the five-year average.
The EIA data also showed imports of oil rose by 356,000 barrels a day, while exports dropped by 746,000 barrels a day.