U.S. oil prices fell nearly 4 percent Wednesday, reaching a session low of $50.28 per barrel and marking their biggest daily percentage decline since early March, as inventories posted a less-than-expected decline for the week.
U.S. crude futures closed the day down 3.76 percent, trading at $50.44 per barrel and hovering only slightly above the key $50 level, while Brent crude futures dropped nearly $2.30 to trade around $52.70 a barrel.
Earlier on Wednesday, the U.S. Energy Information Administration (EIA) said U.S. crude stocks fell 1 million barrels on the week, a bit less than anticipated. A surprise build in gasoline inventories despite heavier refining activity, along with an increase in U.S. crude production, largely pushed prices lower.
“[Wednesday’s] crude drawdown was not as large as expected,” John Kilduff, founding partner at Again Capital, told CNBC in an interview Wednesday. “There was also a large jump in refinery capacity utilization ahead of the peak summer driving season. That’s weighing on the perception of the [EIA] report.”
“In other words, production of these refined products is expected to rise, increasing inventories.”
Kilduff also noted that U.S. daily production increased to 9.25 million barrels per day. “That’s another bearish sign for oil prices.”
The selling intensified into the close on some maneuvering by traders.
U.S. crude for May expires Thursday, and traders are dumping their oil contracts ahead of that, one analyst also noted.
“Some of the people who picked up contracts below $50 decided to run out ahead of expiration,” said Gene McGillian of Tradition Energy.
Meanwhile, the Organization of the Petroleum Exporting Countries (OPEC) has had a difficult time reducing a global crude glut, as supply remains high in parts of the world, particularly the U.S.
“There’s a lot of talk the (OPEC) agreement is going to be extended, but we have a full month to go before the (OPEC) talks are held,” McGillian added. “The market has a hard time sustaining itself within striking distance of the year’s highs.”
U.S. inventories now sit at 532.3 million barrels, only down about 3 million units from the record reached in March.
Energy stocks dragged the stock market down further Wednesday with the SPDR Energy ETF falling to its lowest level since November.
— Fred Imbert, Patti Domm and Reuters contributed to this report.