prices dropped by more than 2% on Wednesday as concerns surrounding a possible trade war intensified and data revealed a fresh weekly record for domestic crude production.
The Energy Information Administration on Wednesday reported a second straight weekly climb in U.S. crude inventories, but the size of the climb nearly matched market expectations, defying a much larger rise reported by a trade group a day earlier.
April West Texas Intermediate crude lost $1.45, or 2.3%, to settle at $61.15 a barrel on the New York Mercantile Exchange. Prices, which posted gains in the last three sessions, had initially pared losses shortly after the supply data. May Brent crude the global oil benchmark, fell $1.45, or 2.2%, to $64.34 a barrel on the ICE Futures Europe exchange.
Oil prices had fallen late Tuesday after the API data, with losses then compounded by news of White House’s chief economic adviser, Gary Cohn’s resignation, which also triggered sharp losses for U.S. stock futures and weakness in the U.S. dollar. Oil has been broadly tracking moves in stock markets, which have been volatile since an early February selloff.
As benchmark indexes for U.S. stocks on Wednesday fell toward to session lows, and the dollar strengthened, losses for crude prices intensified.
“A risk-off move in stocks and reversal higher in the dollar are both adding pressure to the oil market,” said Tyler Richey, co-editor of the Sevens Report.
Cohn’s resignation came on the heels of President Donald Trump’s decision to impose steel and aluminum tariffs that had been opposed by the economic adviser. He was largely viewed as a steady hand in an administration that some critics have called tumultuous.
“Investors have become concerned that without Cohn’s influence within the Trump administration, a trade war is more likely and it will slow economic progress and economic progress,” said Mihir Kapadia, chief executive officer and founder of Sun Global Investments. That could hurt demand for oil.
Meanwhile, the U.S. Energy Information Administration on Wednesday reported that domestic crude supplies rose by 2.4 million barrels for the week ended March 2. Analysts surveyed by S&P Global Platts had forecast a climb of 2.5 million barrels, while the American Petroleum Institute on Tuesday reported a rise of 5.7 million barrels, according to sources.
“A jump in imports, combined with refinery runs holding below 16 million barrels per day, has resulted in a build to crude stocks—something we should expect given the time of year,” Matt Smith, director of commodity research at ClipperData, told MarketWatch. Domestic crude imports averaged 8 million barrels a day last week, up 721,000 barrels a day from a week earlier, the EIA said.
The latest inventory build “means crude stocks are now higher year-to-date, yet are more than 100 million barrels below year-ago levels,” he said.
Total U.S. crude production continued to climb to a fresh weekly level—up 86,000 barrels in the latest week to 10.369 million barrels a day, EIA data showed.
Gasoline stockpiles fell by 800,000 barrels for the week, while distillate stockpiles decreased by 600,000 barrels, according to the EIA. The S&P Global Platts survey forecast supply declines of 500,000 barrels for gasoline and 1.6 million barrels for distillates.
On Nymex, April gasoline fell 1.2% to $1.91 a gallon, while April heating oil fell 1.5% to $1.875 a gallon.
April natural gas settled at $2.777 per million British thermal units, up 1%.