2-28-18 12:39 PM EST | Email Article
By Alison Sider 

Oil prices slid Wednesday after federal data showed that oil and gasoline are building up in storage even as U.S. oil production continues to climb.

Crude inventories grew by 3 million barrels last week, and gasoline increased by 2.5 million barrels, according to the U.S. Energy Information Administration. Distillate inventories fell by 1 million barrels. Altogether, total petroleum stockpiles increased by 3.7 million barrels.

Oil sold off after the government data were released. U.S. crude futures recently traded down 96 cents, or 1.52%, to $62.05 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, fell 89 cents, or 1.34%, to $65.74 a barrel on ICE Futures Europe.

Analysts were anticipating increases, but smaller ones. The American Petroleum Group, an industry group, said Tuesday that its data for the week showed a 933,000-barrel increase in crude supplies, a 1.9 million-barrel rise in gasoline stocks and a 1.4 million-barrel decrease in distillate inventories.

Refiners continued to churn out large amounts of fuel for this time of year, and the increase in gasoline inventories weighed on prices for the fuel. Gasoline futures fell 4.17 cents, or 2.31%, to $1.7617 a gallon. Diesel futures fell 4.64 cents, or 2.37%, to $1.9166 a gallon.

Kyle Cooper, a consultant at ION Energy Group, said the increase in gasoline inventories could be a sign that fuel exports are wavering.

"Both gasoline and distillate exports were quite low and while very volatile, are potentially a very bearish development," he said.

At the same time, U.S. production remained solidly above 10 million barrels a day. Output increased by 13,000 barrels a day in the most recent week to 10.283 million barrels a day.

Relentlessly rising U.S. production from shale has limited oil's gains lately, raising fears that the big gains will blunt the impact of cuts by the Organization of the Petroleum Exporting Countries and others, or even reignite a market-share war among global oil producers. On Tuesday, the head of the International Energy Agency, Fatih Birol, reportedly said that U.S. shale production would help the country surpass Russia as the world's biggest crude producer by 2019 at the latest.

Wednesday's fall in oil prices extended losses from the previous day, when oil prices sold off in tandem with the broader market after statements from Federal Reserve Chairman Jerome Powell made traders more wary of higher interest rates this year.

Tariq Zahir, managing member of Tyche Capital Advisors, said moves like that could become more common.

"If the dollar is getting stronger and equity market getting weaker -- I won't say crude can't go higher, but there are some outside forces in the market we haven't seen in awhile," he said.

--Christopher Alessi contributed to this article.

Write to Alison Sider at alison.sider@wsj.com


(END) Dow Jones Newswires

February 28, 2018 12:39 ET (17:39 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.
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