By Barani Krishnan
Investing.com - Oil prices tumbled as much as 4% percent on Wednesday, logging the sharpest daily loss in three weeks, as a surprise build in U.S. gasoline stockpiles spooked traders, forcing them to ignore lower crude inventories for last week.
New York-traded West Texas Intermediate, the key indicator for U.S. crude prices, settled at $40.03 per barrel, down $1.67, or 4%. The last time WTI fell 4% in a day was on Oct. 2.
London-traded Brent crude, the global benchmark for oil settled at $41.73 per barrel, down $1.43, or 3.4%.
Crude oil inventories fell 1 million barrels for the week ended Oct. 16, against expectations for a draw of 1.02 million barrels, the U.S. Energy Information announced.
But crude stored at the Cushing, Oklahoma delivery point for contracted barrels of WTI increased by 975,000 barrels compared to an expected build of 1.1 million barrels.
Worse, gasoline stockpiles rose by 1.9 millions barrels — an 180-degree build over forecast levels.
Distillates inventories drew down by 3.8 million barrels, or double to expectations — ostensibly due to strong delivery-and-trucking activity as many people remained cloistered in their homes ordering everything from clothing to groceries.
But the market focused on the gasoline build.
“Oil prices will struggle to break free of its autumn range until demand improves for refiners,” said Ed Moya, analyst at OANDA in New York.
The EIA also surprised traders by estimating that U.S. crude production fell by 9.9 million barrels per day last week, down 600,000 bpd from the previous week.
The drop in production jarred with the rise in U.S. oil rigs logged since mid-September, leading some to think the impact on output from this month’s Hurricane Delta had been overestimated. Delta, which struck Louisiana as a Category 2 storm, shuttered nearly 92% of all oil production in the U.S. Gulf of Mexico.