Oil prices dropped over 3 per cent on Thursday as global stock markets fell and the United States reported a surprise build in its crude inventories.  Anadarko photo.

Brent oil prices just over $80/barrel

Oil prices plunged on Thursday as global markets continued to struggle and investors grew more bearish after data showed a bigger-than-expected build in US crude inventories.

By 2:54 p.m., EDT, benchmark Brent crude fell $3.01 to $80.08/barrel and US West Texas Intermediate dropped $2.40 to $70.77/barrel.

According to the US Energy Information Administration, US crude stocks jumped by 6 million barrels last week, more than doubling analysts’ expectations of a 2.6 million barrel increase.

This is the third straight week of increases in US crude inventories, mostly due to seasonal maintenance at a number of refineries.  Refinery crude runs declined by 352,000 barrels per day (b/d) and utilization rages fell by 1.6 per cent, according to EIA data.

“It was a mostly bearish report,” John Kilduff, parter at Again Capital Management told Reuters. “The large increase in overall crude oil inventories and a decent-sized increase at the Cushing, Oklahoma, delivery hub is a negative for prices, as it eases some of the supply crunch worries that have crept into the market”.

Declines in US equity markets and a global risk-off environment also impacted crude futures.  On Wednesday, the S&P 500 and the Dow Industrials indexes posted their worst day in eight months on economic data that reinforced expectations of multiple interest rate hikes in the coming year.

“The demand side of the oil equation is always much more difficult to discern than the more transparent supply side and as equities slide amidst rate increases, the oil market could begin to discount a worst case scenario with regard to oil demand expectations,” Reuters reports Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.

OPEC has also cut its forecast for global economic growth in 2019 for a third straight month.  The cartel says escalating trade disputes and volatile emerging markets are the cause.

In the wake of Hurricane Michael, US Gulf of Mexico oil producers are beginning to return their crews to over 90 offshore facilities that were evacuated prior to the storm.  Hurricane Michael caused production shut-ins and halted 42 per cent of Gulf oil output.

Michael made landfall on Wednesday and has since weakened to a tropical storm.