Oil fell below $67 a barrel on Wednesday, after a US government report showed a build in crude inventories in the world's top consumer. London Brent, seen for now as more representative of global prices than US oil, settled down 75 cents at $66.25 a barrel, adding to losses of 65 cents on Tuesday. US crude fell 72 cents to $63.68, after trading as low as $63.05.
US crude oil inventories rose by 1.1 million barrels last week, even as refinery use climbed, the Energy Information Administration said. The increase was slightly higher than analyst forecasts for a rise of 1.0 million barrels.
"The EIA data showing crude stocks rose last week was within market expectations and, as such, you are seeing a sell-off," said Mark Waggoner of Excel Futures in Huntington Beach, California.
Meanwhile, stocks of gasoline dropped for a 12th straight week, down 1.1 million barrels. Gasoline futures have helped to support crude oil in recent weeks, but recent refinery problems have also reduced US crude demand. Traders said the recovery in refinery runs could mark the beginning of a larger price drop.
"A major correction is underway," said Mike Fitzpatrick, vice president at Man Financial. "The market had clearly gotten ahead of itself, but needs further refinery news to keep upward momentum going." Claude Mandil, executive director of the International Energy Agency, said prices were too high and global stockpiles were too low.
"Stocks are not building. There is not enough oil in the market," Mandil told reporters in Riyadh, Saudi Arabia. But the secretary-general of the Organisation of Petroleum Exporting Countries said there was no need to increase supplies. "The market is very stable," Abdullah al-Badri said. Technical analysts, who predict future movements on the basis of past performance, said the market was looking more bearish.
"The recent patterns are showing strong selling at the resistance levels and we would not exclude further offloading of positions," said Olivier Jakob of Petromatrix.
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