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Oil prices extend losses, sinking 2% after US crude stockpiles rise

Key Points
  • Traders said most pressure ensued after the American Petroleum Institute (API) on Tuesday reported a surprise 5.3 million barrels rise in crude stocks.
  • "After it rebounded from its early-week high, profit-taking is likely to have ensued," Commerzbank's Carsten Fritsch said in a note.
  • U.S. oil production has risen by nearly 25 percent in the last two years to over 10 million barrels per day.
A pump jack operates at a well site leased by Devon Energy Production Co. near Guthrie, Oklahoma.
Nick Oxford | Reuters

Oil prices extended losses on Wednesday after government data showed U.S. crude stocks rose unexpectedly last week, while gasoline and distillate inventories fell more than expected.

U.S. commercial crude inventories rose by 1.6 million barrels in the week to March 23, the Energy Information Administration said on Wednesday . Analysts in a Reuters poll had expected a decrease of 287,000 barrels.

Stocks at the closely-watched Cushing, Oklahoma delivery hub for U.S. crude also rose by 1.8 million barrels, EIA said.

Brent crude futures for June delivery were last down $1.29, or 1.9 percent, at $68.17 barrel, while the May contract, which expires on Thursday, was down $1.12, or 1.6 percent, at $68.99.

U.S. West Texas Intermediate futures fell $1.33, or 2 percent, to $63.92 a barrel.

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The oil price has risen in seven out of the last 9 months, and Brent crude has increased by more than 4 percent this year, making this the third consecutive quarter of gains, which is the longest stretch since late 2010.

Futures had come under pressure earlier in the session after the American Petroleum Institute issued a report on Tuesday that suggested stocks had risen by 5.3 million barrels.

"After it rebounded from its early-week high, profit-taking is likely to have ensued," Commerzbank's Carsten Fritsch said in a note.

"This was exacerbated by an appreciating U.S. dollar," he added.

Gasoline stocks fell by 3.5 million barrels, compared with analysts' expectations in a Reuters poll for a 2 million barrels drop. Distillate stockpiles, which include diesel and heating oil, declined by 2.1 million barrels, versus expectations for a 1.6 million barrels drawdown, the EIA data showed.

"From a seasonal perspective, rising crude oil stocks and falling product stocks are what can be expected at this time of year when refinery maintenance reduce demand for oil and the production of products," Saxo Bank head of commodity strategy Ole Hansen said.

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U.S. oil production has risen by nearly 25 percent in the last two years to over 10 million barrels per day, taking it past top exporter Saudi Arabia and within reach of the biggest producer, Russia, which pumps around 11 million bpd.

Weekly U.S. production figures from EIA, which are later revised, showed American production continuing to tick higher to 10.43 million barrels a day.

Wednesday's price falls came despite Saudi Arabia saying it was working with Russia on a historic long-term pact that could extend controls over world crude supplies by major exporters for many years.

Saudi Crown Prince Mohammed bin Salman told Reuters that Riyadh and Moscow were considering greatly extending a short-term alliance on oil curbs that began in January 2017 after a crash in crude prices, with a partnership to manage supplies potentially growing "to a 10-to-20-year agreement."

In Asia, Shanghai crude oil futures posted high volumes and volatile trade on their third day of trading.

— CNBC's Tom DiChristopher contributed to this report.