Energy

Oil slides 1.8% as US inventories build, weak economic data weighs

A oil rigger at the Schlumberger field prepares pipes in Midland, Texas on December 16, 2008.
Kirk McKoy | Los Angeles Times | Getty Images

Oil prices fell on Wednesday after official data showed a rise in U.S. crude inventories, adding to worries about an oversupplied market as weak economic readings in the United States depressed global markets.

Brent crude futures were down 2.3% at $57.51 a barrel. U.S. West Texas Intermediate (WTI) crude futures fell 1.8% to $52.64 a barrel.

Wall Street fell more than 1% for the second straight session, with stocks hitting a fresh one-month low, as September's weak private payrolls report added to concerns of a slowdown in the world's largest economy.

U.S. crude inventories rose by 3.1 million barrels last week, the Energy Information Administration said, compared with analyst expectations for an increase of 1.6 million barrels.

Crude stocks at the Cushing, Oklahoma, delivery hub for WTI fell by 201,000 barrels, EIA said.

"I think you're continuing to get signs that demand growth is the primary drag on the market, with the disappointing manufacturing number that came out yesterday," said Gene McGillian, vice president of market research at Tradition Energy in Stamford, Connecticut.

Front-month WTI prices settled down for a sixth straight session on Tuesday, their longest losing streak this year, after U.S. manufacturing activity dropped to a 10-year low as U.S.-China trade tensions weighed on exports.

"Even with 12 days and counting of bearish trading action on WTI futures, that market is now only starting to reach oversold territory. $50.50 remains a key support level," said David Thompson, executive vice president at Powerhouse, an energy-specialized commodities broker in Washington.

Signs of easing geopolitical tensions in the Middle East also weighed on prices, traders said. Tensions between the two countries flared after Saudi Arabia blamed Iran for an attack on Saudi oil facilities on Sept. 14., a charge Tehran denies.

Iran's Oil Minister Bijan Zanganeh sought to defuse tensions with Saudi Arabia, calling his counterpart in Riyadh "a friend" and saying Tehran was committed to stability in the region.

Both oil ministers from Iran and Saudi Arabia, which have repeatedly clashed at OPEC meetings over output policies, were attending a top Russian energy conference chaired by President Vladimir Putin.

Putin said Russia would continue to be a responsible player in the alliance between the Organization of the Petroleum Exporting Countries and non-OPEC oil-producing nations, known as OPEC+, which has since Jan. 1 implemented a deal to cut output by 1.2 million barrels per day until March 2020.

The Russian president said it was important to use all available tools to balance the energy markets.

Iran's oil minister also said he expected a slight surplus on the oil supply side next year.

The United Arab Emirates' Minister of Energy and Industry Suhail al-Mazrouei said OPEC and its allies were monitoring global oil markets, and that conformity levels were the same as previously announced at the last OPEC+ joint ministerial monitoring committee meeting.

Meanwhile, Ecuador, one of the smallest members of the Organization of the Petroleum Exporting Countries, said it would leave the 14-nation bloc from Jan. 1 due to fiscal problems. Ecuador will be the second country to withdraw from OPEC in the last year after the departure of Qatar.