Oil futures fell sharply Wednesday after data from the US Energy Information Administration showed a larger-than-expected build in crude stocks and a surprise increase in gasoline inventories.
A stronger dollar kept a lid on prices early Wednesday, carrying over from Tuesday, when testimony from Federal Reserve Chairman Jerome Powell was seen as hawkish on monetary policy.
The market reaction to the release of the EIA data set the tone for the rest of the session as the complex slid immediately.
Crude stocks rose 3.019 million barrels to 423.498 million barrels in the week that ended February 23, according to EIA data.
Analysts that S&P Global Platts surveyed Monday were looking for a 2.1 million barrel build in crude stocks.
NYMEX April crude settled $1.37 lower at $61.64/b. ICE April Brent expired 85 cents lower at $65.78/b. The May contract fell $1.79 to settle at $64.73/b.
US crude production rose 13,000 b/d to 10.283 million b/d last week, an all-time high, according to EIA weekly estimates that go back to 1983.
"We're seeing increases in production and rigs, so there could be significant builds in inventories before the summer," said Kobe Liu, commodity strategist at Schneider Electric.
Another factor pushing stocks higher last week was trade flows, as imports rebounded and exports fell.
Exports averaged 1.445 million b/d last week, down 599,000 b/d from the week prior, while imports rose 261,000 b/d last week to 7.282 million b/d.
Gasoline stocks increased 2.483 million barrels to 251.817 million barrels the week that ended February 23, according to EIA data.
That came as a surprise as analysts were looking for a draw of 200,000 barrels and the five-year average shows a draw of 1.3 million barrels for the same period.
Distillate stocks declined 960,000 barrels last week to 137.985 million barrels, versus an expected draw of 200,000 barrels.
Product cracks were under selling pressure Wednesday. In the afternoon, the NYMEX RBOB crack against WTI was down $1.06 at $19.27/b. The NYMEX ULSD crack against WTI was $1.42 lower at $18.26/b.
NYMEX March ULSD expired Wednesday 4.94 cents lower at $1.9136/gal. April ULSD settled 6.52 cents lower at $1.9035/gal.
NYMEX March RBOB went off-the-board at $1.7577/gal, down 4.57 cents. The April contract settled 5.97 cents lower at $1.9246/gal.
