Oil prices fell over 1 per cent on Wednesday after data from the US Energy Information Administration reported a surprise increase in US crude stocks, mostly due to increased imports.  Tulsa World photo.

Oil prices down as US crude stocks rose by 1.6 million barrels

On Wednesday, oil prices fell after the US Energy Information Administration released data showing a surprise increase in US crude inventories of 1.6 million barrels.

By 2 p.m. EDT, benchmark Brent crude was down 83 cents to $68.63/barrel.  The May contract, which expires Thursday, dropped 70 cents to $69.41/barrel.  US WTI hit a session low of $63.79/barrel but recovered to $64.41 with crude futures for May delivery down 92 cents to $64.33.

The discount between Brent and WTI widened to as much as $5.22/barrel, the largest since late January.

The Canadian Crude Index also fell, dropping by 76 cents to $43.75.

Analysts had anticipated US crude stocks to fall by 287,000 barrels last week, however, the EIA reports an increase of 1.6 million barrels in oil inventories and net US imports rose by 1.1 million barrels per day.

“It was a big import week, and they were up over a million barrels a day,” Bob Yawger, director of energy futures at Mizuho told Reuters. “So that’s where you get your build from.”

US crude oil stocks decreased by 2.6 million barrels last week, according to analysts Drillinginfo.

Gasoline and distillate inventories decreased by 1.7 million barrels and 2.0 million barrels, respectively. Yesterday afternoon, API reported a large crude oil build of 5.3 million barrels while reporting gasoline and distillate draws of 5.8 million barrels and 2.2 million barrels, respectively. Analysts, to the contrary, were expecting a smaller crude oil build of 1.0 million barrels.

The most important number to keep an eye on, total petroleum inventory levels, posted a decrease of 1.6 million barrels, says Drillinginfo.

The EIA reports oil inventories at the Cushing, Oklahoma delivery hub were up by 1.8 million barrels.

“Oil supplies at Cushing, Oklahoma are starting to replenish, which is bearish for prices, but they have a long way to go to near normal levels of supply,” John Kilduff, partner at energy hedge fund Again Capital LLC told Reuters.

The energy agency also reported an increase in US production to a record high of 10.433 million b/d.  Over the past two years, US crude production has increased by nearly 25 per cent.  By the end of the year, US oil output is expected to catch up to Russian production which now sits at about 11 million b/d.

OPEC’s supply cut agreement has helped oil prices rise for the past three consecutive quarters, the longest stretch since late 2010 and early 2011.

On Tuesday, Saudi Arabia’s Crown Prince Mohammed bin Salman told Reuters that Riyadh and Russia continue to discuss extending their short-term alliance on curbing crude production.  He said the partnership between the two oil superpowers could grow into a “10-to-20 year agreement”.