Oil prices fell towards $57 a barrel on Wednesday after the largest weekly build in U.S. crude inventories since 2001 and as Saudi Arabia reported record output in March.
The U.S. Energy Information Administration (EIA) reported that U.S. stocks of crude oil rose in the week to April 3 by 10.9 million barrels – the largest weekly build since March 2001 – to a record 482.39 million barrels. [EIA/S]
A Reuters poll of analysts had forecast a build of 3.4 million barrels.
“The report is very bearish with the large crude oil inventory build and the somewhat surprising rise in gasoline inventories,” said John Kilduff, partner at Again Capital LLC in New York.
Brent May crude <LCOc1> was down $2.06 at $57.04 a barrel by 1444 GMT and U.S. May crude <CLc1> dropped $2.34 to $51.64 a barrel.
Both benchmarks posted strong gains in the past two sessions but are still down about 50 percent since June last year.
Adding to the global oil supply, Saudi oil minister Ali al-Naimi said late on Tuesday that Saudi output would likely remain around 10 million barrels per day (bpd) after posting a record high of 10.3 million bpd in March.
Naimi also said the kingdom stood ready to “improve” prices but only if producers outside the Organization of the Petroleum Exporting Countries (OPEC) joined the effort.
Iraq and Libya also increased their output for March, further adding to OPEC production, which came to about 31.5 million bpd last month, according to analyst Olivier Jakob at Swiss-based Petromatrix.
“With such a level of OPEC production it will be difficult to escape large stock-builds throughout the year,” he said in a note.
Iranian oil officials are in Beijing this week to discuss oil sales and Chinese investments in Iran, just days after Tehran and world powers reached a framework nuclear deal.
Still, any significant increase in Iranian oil exports is unlikely until 2016, analysts have said.
In company news, Royal Dutch Shell <RDSa.L> said on Wednesday it had agreed to buy BG Group <BG.L> for 47 billion pounds ($70 billion) in the first oil super-merger in a decade.
(Additional reporting by Henning Gloystein and Florence Tan in Singapore; Editing by Dale Hudson and Louise Heavens)