NEW YORK: Crude oil futures sank on Wednesday after US government data showed an unexpectedly sharp build in crude inventories, but a third weekly draw down in gasoline stocks kept losses at bay.
A drop in US equity indexes also weakened sentiment in crude prices.
Brent crude futures fell 12 cents, or 0.2 percent, to $65.74 a barrel by 1:40 p.m. EST (1840 GMT). US crude oil futures fell 46 cents, or 0.8 percent, to $56.10 a barrel.
US crude inventories rose 7.1 million barrels last week, far exceeding analysts' expectations for an increase of 1.2 million barrels, the Energy Information Administration (EIA) said.
US gasoline stocks fell 4.2 million barrels, compared with analysts' expectations in a Reuters poll for a 2.1 million-barrel drop as refinery rates remained low, leading US gasoline futures 0.6 percent higher.
"A big rebound in US crude oil imports, combined with a drop in exports led to the large increase in domestic inventories," said David Thompson, executive vice president at Powerhouse, an energy-specialized commodities broker in Washington. "Demand for refined products remains decent."
Crude futures also tracked a slump in US equities, which sputtered without positive developments in trade talks between Washington and Beijing.
"I think there's a little less optimism in relation to the US-China trade negotiations," said Tony Headrick, energy market analyst at commodity brokerage CHS Hedging LLC. "It has sort of gone quiet, so I think equities are continuing to provide an influence here."
The markets have also been hit by surging US crude production, which, according to the EIA, held at an all-time high of 12.1 million barrels per day last week.
Chevron Corp and Exxon Mobil Corp released rival Permian Basin projections on Tuesday pointing to increased shale oil production in the largest US oil patch.
The increases would cement the pair as the dominant players in the West Texas and New Mexico field, with one-third of Permian production potentially under their control within five years.
The rise in North American production undermines supply cuts led by the Organization of the Petroleum Exporting Countries and its non-member allies, including Russia, that has helped crude prices rise about 20 percent this year.
OPEC and its partners have pledged to curb output by 1.2 million bpd, and they are likely to push back their decision whether to extend the production agreement to June from April, sources said.
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