Oil prices at midday Wednesday, November 2, crashed as U.S. Energy Information Administration data showed U.S. crude stockpiles rose sharply last week as refineries cut output, CNBC reports.
Oil prices plunged after a record 14.4-million barrel jump in U.S. crude supply, and they could continue to fall toward $40 a barrel or lower, unless the Organisation of Petroleum Exporting Countries and global producers make progress on a production deal.
Brent crude was at $46.70, down about 3 percent. U.S West Texas Intermediate crude futures for December were down 3 percent at midday Wednesday, trading at $45.20 after falling briefly below $45 per barrel.
“In the absence of stronger statements or better weekly stats, you’ll see it trending down. The problem is the market is really long at this point,” said Helima Croft, head of global commodities strategy at RBC.
The U.S. government’s Energy Information Administration Wednesday reported the record inventory increase in its weekly report for Oct. 28. The number is volatile, but there was also a two million barrel increase in U.S. imports to 9 million barrels, the highest since 2012.
The increase in supply comes after several weeks of draw downs and a sharp drop in inventories of 14 million barrels in early September, which was blamed on Hurricane Matthew and other storms.
“I think what it points to is how much the market is relying on the expected growth in demand in the next year. If you start to change expectations on that, and you don’t get the OPEC deal hammered out, it seems like it’s a really clear case of we’re going to be testing that $40 mark.”
But bottom line, the U.S. data show a world that is still oversupplied with oil. Production in the U.S. held steady at about 8.5 million barrels a day, and refinery utilisation fell by 0.4 percent.
Crude has been weak since the prospects of an OPEC deal to limit production have faded. Over the weekend, discussions led to no agreement, though there could still be one by the time OPEC meets at the end of the month.
