Oil extends losses as US crude, gasoline stocks rise last week

In New York, US benchmark West Texas Intermediate crude for delivery in October lost $1.33 at $46.77 a barrel.

Oil prices tanked on Wednesday after official data showed an unexpected increase in United States weekly crude inventories.

Markets will need a long time to go through the excess supplies, analysts said, as USA inventories of crude and refined products rose to a fresh all-time high this week. Oil production has risen from 2.7 million bpd to 3.85 million bpd in that time, close to the level before worldwide sanctions were imposed in 2012.

The U.S. Energy Information Administration (EIA) reported crude inventories rose 2.5 million barrels last week, versus analysts forecasts for a drawdown of 500,000 barrels.

A similar decline when the U.S. energy department releases official data on commercial crude inventories on Wednesday could see WTI “pull back to the $45 handle”, said IG Markets analyst Angus Nicholson.

After touching a high of just above $50 a barrel mark in June, crude oil prices tanked entering a bear market falling to a low of just below $40 a barrel by early August.

The overhang in developed economies of middle distillates, which include diesel and heating oil, is at around 72 million barrels or around four days of consumption, according to Fyfe.

With the oil markets already jittery, some market participants said they believe bearish data from the world’s two largest oil-consuming countries could provide a serious headwind for prices moving into next week.

Gasoline stocks USOILG=ECI inched up 36,000 barrels, compared with expectations in a Reuters poll for a 1.2 million-barrel drop.

Unplanned outages in the U.S. Gulf Coast, a major export hub, including at ExxonMobil’s 502,500 bpd Baton Rouge refinery, are further helping reduce the glut.

“I really can’t see the sense for Saudi, in particular, to actually have some meaningful constraint on production because there is quite a lot of capacity of USA shale to come on quite quickly”, Spooner said, adding that he could see prices drifting closer to $45 a barrel over the next few days.

“And when Iraq and Saudi Arabia are producing at record levels, it is hard to see Iran being happy to produce well below their potential”, he added.