West Texas Intermediate crude fell to the lowest level in six weeks after a government report showed bigger-than-expected gains in gasoline and distillate supplies as demand dropped.
Prices slid for the sixth time in seven days.
Inventories of gasoline and distillates, including diesel fuel and heating oil, climbed more than twice as much as analysts predicted in the week ended Jan. 3.
Total products supplied, a measure of consumption, tumbled 4.1 percent to the least in seven months, the Energy Information Administration reported.
“The big build in products should mean weaker crude prices,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Mass. “The report is bearish given the weak demand numbers. The price may even break $90.”
WTI for February delivery dropped $1.34, or 1.4 percent, to $92.33 a barrel on the New York Mercantile Exchange, the lowest settlement level since Nov. 27.
The volume of all futures traded was 15 percent above the 100-day average at 3:03 p.m.
Brent for February settlement slid 20 cents to end the session at $107.15 a barrel on the London-based ICE Futures Europe exchange.
Volume was 13 percent above the 100-day average. The European benchmark crude was at a $14.82 premium to WTI, $1.14 wider than at Tuesday’s close.
Gasoline inventories rose 6.24 million barrels to 227 million in the week ended Jan. 3, the EIA said.
That’s the highest level since March. Stockpiles were forecast to increase 2.5 million barrels, according to the median of 10 analyst estimates in a Bloomberg survey before the report.
Distillate supplies jumped 5.83 million barrels to 125 million, the most since October. They were projected to gain 2.25 million barrels from the prior week’s level, the survey showed.
Total products demand slid 782,000 barrels a day to 18.2 million, the least since June 7, according to the EIA, the Energy Department’s statistical arm. Gasoline consumption dropped to 8.27 million barrels a day, a one-year low.
“The major issue is the large build in gasoline and distillate,” said Bill Baruch, a senior market strategist at Iitrader.com in Chicago. “Fuel is not being consumed. That’s really what got this market lower.”
Gasoline for February delivery fell 2.23 cents, or 0.8 percent to $2.6563 a gallon on the Nymex. Ultra low sulfur diesel fuel dropped 0.99 cent, or 0.3 percent, to $2.9494 a gallon.
Crude stockpiles decreased for a sixth week to 357.9 million barrels, the lowest level since Sept. 13, the EIA said. The decline was 2.68 million barrels.
Analysts surveyed by Bloomberg expected a drop of 2.75 million. The inventories are near a 30-year seasonal high, even after dropping 33.5 million barrels in six weeks, the most since October 1990.
Refineries operated at 92.3 percent of capacity, down 0.1 percentage point from the prior week. About 16.1 million barrels a day of crude was processed. The figure reached a seven-year high of 16.2 million Dec. 27 and has been over 16 million for five of the past six weeks.
“The crude draws seem normal when you consider that we’ve been running refineries over 16 million barrels a day,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. “The thing that justifies the drop in WTI is the large build in inventories of products.”
Domestic crude production rose to 8.15 million barrels a day, the most since September 1988, the EIA report showed.
Output has surged as a combination of horizontal drilling and hydraulic fracturing, or fracking, unlocked supplies trapped in shale formations from Texas to North Dakota.
Inventories at Cushing, Okla., the delivery point for WTI futures, rose 1.1 million barrels to 40.7 million, the highest level in a month.
“We’ve been drawing crude a lot overall, but none of it is from Cushing,” Larry said.
Crude prices also fell as Libya’s state-owned National Oil Corp. said production increased because of the resumption of pumping from the Sharara oil field. Output rose to 546,000 barrels a day Tuesday.
The country, the holder of Africa’s largest oil reserves, produced 210,000 barrels of oil in December, unchanged from the prior month and the lowest level since September 2011, according to data compiled by Bloomberg.
Implied volatility for at-the-money WTI options expiring in March was 18.9 percent, up from 18.4 percent Tuesday, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 537,367 contracts at 3:03 p.m. It totaled 466,772 contracts Tuesday, 12 percent lower than the three-month average. Open interest was 1.62 million contracts.