Oil slumps to five-week low

The price of US crude oil has dropped sharply following the release of weekly inventory data from the US Energy Department.

The Energy Information Administration’s weekly petroleum status report shows that US supplies of gasoline and fuel distillates are building, with inventories increasing faster last week than expected.

Gasoline inventories expanded by 6.2 million barrels, after a 0.6 million increase the week before, and distillates rose 5.8 million barrels, following a 5.0 million increase in the week prior, for the largest build in distillates in around a year.

Though refinery output remained high with utilisation running at 92.3% of capacity, the big build-up of stocks of refined products suggests this will likely ease in coming weeks, which should have an effect on crude oil inventories. Total products supplied plummeted 4.1% to a seven-month low, indicative of easing consumption. Gasoline consumption fell to 8.27 million barrels a day, the lowest level seen in a year.

The draw in crude supplies is not remarkable given the high run rates we’ve been seeing at refineries in the last few weeks; the key issue in today’s report is that the refined products are backing up because of a lack of demand, which is bearish for crude. By mid-afternoon in New York, crude oil futures for February were down more than 1% at $92.40 a barrel.

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