Crude fell the most in two weeks on a U.S. Energy Department report showing a larger-than-expected supply gain.
Prices dropped 1.5 percent after the government said oil inventories rose 3.86 million barrels in the week ended April 13, more than double the increase forecast in a Bloomberg survey of analysts. Refineries operated at less than 85 percent of capacity for a second week.
“It’s another week of the battle of large numbers,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “The refinery industry continues to operate at sub-optimal levels and crude oil of course is going to build if they are not processing it.”
Oil for May delivery slid $1.53 to settle at $102.67 a barrel on the New York Mercantile Exchange. Futures have declined 6.5 percent since settling at $109.77 on Feb. 24, the highest level since May 2011.
Brent for June settlement fell 81 cents, or 0.7 percent, to $117.97 a barrel on the London-based ICE Futures Europe exchange. Brent futures’ premium to West Texas Intermediate for June widened to $14.85 from yesterday’s $14.14.
Oil inventories climbed to 369 million, the most since the week ended May 27, the department said. They were forecast to grow 1.8 million barrels in the Bloomberg survey.
The U.S. gain comes after the International Energy Agency reported April 12 that crude stockpiles among the 34 industrialized countries in the Organization for Economic Cooperation and Development rose 1.8 percent to 936.2 million barrels in February from January.
“The market is in a correction phase right now,” said Mike Wittner, head of oil market research at Societe Generale SA in New York. “It’s not just the U.S. Throughout the OECD, we’ve seen inventories increase.”
There is no need for the Organization of Petroleum Exporting Countries to change production quotas in June if demand remains at current levels, Iraq’s deputy prime minister for energy said.
“There is neither shortage of production or excess of production,” Hussain al-Shahristani said in an interview in London today after attending a refining conference. “In general, the oil market is fairly balanced.”
OPEC ministers are scheduled to meet June 14 in Vienna.
U.S. petroleum demand fell 0.7 percent to 18.9 million barrels a day last week from the period ended April 6, the Energy Department said. That’s 2.1 percent less than a year ago.
Fuel consumption in the U.S. typically peaks between the Memorial Day holiday at the end of May and the Labor Day holiday at the beginning of September, a period the industry calls summer driving season.
‘Plenty of Oil’
“Even though we are going into the driving season, there is still plenty of oil to be held in storage,” said Todd Horwitz, chief strategist at Adam Mesh Trading Group in New York. “I am looking for prices to go down to $100.”
U.S. stockpiles of gasoline and diesel dropped more than forecast in the Energy Department report as refineries operated at a rate of 84.6 percent. That’s up from the previous week’s 83.8 percent, though lower than the 85.7 percent figure for the week ended March 30.
Gasoline inventories fell 3.67 million barrels to 214 million last week, the lowest level since Nov. 25. Stockpiles were forecast to slip 1.1 million barrels, according to the Bloomberg survey.
Distillate supplies, which include heating oil and diesel, dropped 2.91 million barrels to 129 million. Inventories were estimated to fall 125,000 barrels in the survey.
“The drop in crude prices is in large part due to the failure of the market to respond to the supportive gasoline data,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York.
Brent’s premium to WTI widened for the first time since Enbridge Inc. and Enterprise Products Partners LP said they would start moving oil from Cushing, Oklahoma, to the U.S. Gulf Coast via the Seaway pipeline on about May 17. That’s earlier than a previous June 1 start date.
The Seaway reversal is forecast to reduce a glut of crude at Cushing, the U.S. Midcontinent pipeline hub, and bring WTI prices closer to Brent.
“This Brent-WTI spread still has the potential to widen,” said Rich Ilczyszyn, chief market strategist and founder of Iitrader.com in Chicago. “We still have a month before the Seaway reversal.”
Electronic trading volume on the Nymex was 562,689 contracts as of 3:17 p.m. in New York. Volume totaled 676,818 contracts yesterday, 5.3 percent above the three-month average. Open interest was 1.57 million.