Oil fell to the lowest level in more than six months as U.S. supplies grew to the most since 1990 and talks to form a coalition government in Greece collapsed, raising concern that Europe’s debt crisis will worsen.
Prices declined for a fourth day as the Energy Department reported oil inventories climbed 2.13 million barrels last week to 381.6 million. Greece will probably schedule new elections next month. Oil was also lower after Kyodo News reported the U.S. government called on other Group of Eight countries to prepare to release strategic oil reserves.
“We are still not out of the woods yet,” said Tom Bentz, a director with BNP Paribas Prime Brokerage Inc. in New York. “The focus is still on Europe. All the markets are going to be dependent on how things go there.”
Crude oil for June delivery fell $1.17, or 1.2 percent, to $92.81 a barrel on the New York Mercantile Exchange, the lowest settlement since Nov. 2. Prices have fallen 15 percent since closing at the 2012 high of $109.77 a barrel on Feb. 24.
Brent oil for June settlement slipped 53 cents, or 0.5 percent, to expire at $111.71 a barrel on the London-based ICE Futures Europe exchange. The more-actively traded July futures retreated $1.70, or 1.5 percent, to $109.75.
U.S. oil supplies were forecast to rise 1.75 million barrels last week, according to the median estimate in a Bloomberg survey of analysts.
Inventories at Cushing, Oklahoma, the delivery point for Nymex futures, gained 2.3 percent to 45.1 million barrels, the highest level on record, the Energy Department reported.
“The crude market is oversupplied, and I am going to sell,” said Todd Horwitz, chief strategist at Adam Mesh Trading Group in New York. “There is no reason to get excited.”
Total U.S. petroleum demand was little changed in the four weeks ended May 11. Consumption averaged 18.7 million barrels a day, up 0.2 percent from the previous week, according to the Energy Department.
The reversal of the Seaway pipeline tomorrow to move crude away from the storage hub at Cushing for the first time may do little to ease the glut that has kept West Texas Intermediate oil below Brent for an unprecedented 21 months, according to Citigroup Inc. and Barclays Plc.
Brent’s premium to New York futures widened by 64 cents to $18.90 a barrel, the widest spread since April 13 based on settlement prices for the two contracts closest to expiration.
The line’s capacity of 150,000 barrels a day won’t make much difference to stockpiles amid “really heavy” refinery maintenance, said Amrita Sen, a London-based analyst at Barclays. Supplies will rise as production surges, Ed Morse, global head of commodities research at Citigroup in New York, said in an April 16 note.
“There’s plenty of oil everywhere,” said Sarah Emerson, managing director of Energy Security Analysis Inc. in Wakefield, Massachusetts. “The market is very well supplied.”
Prices also dropped on concern Greece may leave the euro zone. A Greek caretaker government will prepare new elections, probably on July 17, after President Karolos Papoulias was unable to broker the creation of a governing coalition in meetings with other political leaders, Fotis Kouvelis, head of the Democratic Left party, said.
German Finance Minister Wolfgang Schaeuble said the new elections will be a referendum on whether Greece stays in the euro.
“Europe is really dictating trading,” said Tom Essaye, president of Kinsale Trading in Palm Beach, Florida.
The European Union will ban crude imports from Iran starting in July, prompting the U.S. government to call on other G-8 members to prepare for a release of emergency stockpiles, according to Kyodo, which cited unidentified officials familiar with Japan-U.S. ties. Iran is OPEC’s second-largest oil producer.
The EU reached an agreement in January to implement the oil embargo against Iran starting July 1 to pressure the country over its nuclear program.
Prices briefly rose after the Energy Department report, which also showed gasoline inventories decreased 2.8 million barrels to 204.3 million. Distillate supplies, which include heating oil and diesel, decreased 969,000 barrels to 119.8 million.
“There is a big build in crude inventories but on the bullish side are the product numbers,” Essaye said. “The inventory numbers were generally neutral.”
Prices pared losses after minutes of the last meeting of Federal Reserve policy makers showed several said a loss of momentum in growth or increased risks to their economic outlook could warrant additional action to keep the recovery on track.
Electronic trading volume on the Nymex was 587,819 contracts as of 3:11 p.m. in New York. Volume totaled 596,463 contracts yesterday, 0.6 percent below the three-month average. Open interest was 1.54 million.