NEW YORK (Reuters) - Oil dropped nearly 6 percent on Wednesday to near $63 a barrel in the biggest one-day slide since April after data showed a surge in U.S. crude inventories on higher imports and lower refinery activity.
Crude stocks in the world’s top consumer jumped 5.1 million barrels in the week to July 24, according to data from the U.S. Energy Information Administration, countering analyst expectations for an inventory draw. <EIA/S>
The build came as crude imports hit a six-month high and refiners -- their profits battered by limp demand -- cut back on their processing rates.
U.S. crude traded down $3.88, or 5.77 percent, to settle at $63.35 a barrel in the biggest percentage decline since April 20. London Brent fell $3.35 to $66.53 a barrel.
Over the past four weeks, U.S. fuel consumption dropped 4.1 percent against year-ago levels, led by a 10.7 percent drop in demand for distillates, which include key industrial fuels such as diesel. Distillate stocks rose to the highest level in nearly 25 years, while gasoline stockpiles fell, the EIA said.
“The build this week will put more pressure on oil, especially given that we were already seeing return of risk aversion across markets, with the U.S. dollar climbing and the stock market lower,” said Rachel Ziemba, lead energy analyst for RGE Monitor in New York.
Optimism an economic recovery has helped push crude prices up from below $33 a barrel in December, with investors looking toward positive economic data for signs of a turnaround in flagging oil demand.
U.S. stock markets .N traded lower on Wednesday and the dollar rose broadly as investors piled into safer havens.
Further pressure came after commerce Department data showed new durable goods orders fell 2.5 percent in June, the largest percentage drop since January, after rising 1.3 percent in May.
Falling demand due to the recession knocked crude off record highs near $150 a barrel hit last July, clipping a six-year rally in commodities that had been fueled by rapid growth expansion in emerging economies such as China.
The wide swings in prices has raised concern over speculation in commodities markets, prompting the U.S. Commodities Futures Trading Commission to consider implementing position limits for some commodity futures.
CFTC Gary Gensler said on Wednesday he supported exemptions from tough new investor limits for bona fide hedgers, however, despite worries they could limit the usefulness of position limits.
“While I believe that we should maintain exemptions for bona fide hedgers, I am concerned that granting exemptions for financial risk management can defeat the effectiveness of position limits,” he said during the second day of hearings on tightening regulatory oversight of U.S. futures markets.
A senior analyst for the International Energy Agency said volatile oil prices may have reached a floor.
“The evidence so far suggests that prices have probably reached a floor which may be around $50 to $60,” Eduardo Lopez told Reuters on the sidelines of an oil and gas conference in Cape Town.
Additional reporting by Gene Ramos and Robert Gibbons in New York and Joe Brock and Barbara Lewis in London; Editing by Christian Wiessner
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