Oil prices plunged early on Thursday to the lowest in a month after U.S. government data showed on Wednesday that inventories hit their highest since September 2017 and production soared to another record level last week.
As of 11:25 EDT on Thursday, WTI Crude was plunging 3.68 percent at $61.26 and Brent Crude was trading down 2.67 percent at $70.25.
On Wednesday, oil prices dipped after the Energy Information Administration (EIA) reported a substantial build in crude oil inventories, at 9.9 million barrels for the last week of April.
At 470.6 million barrels, U.S. crude oil inventories are at the five year average for this time of year, the EIA said, but this level of stockpiles is the highest since September 2017. The inventory build also comes at a time when OPEC—led by significant losses in production by Venezuela and Iran, as well as conscious efforts to curb production by Saudi Arabia—has purposed to drawdown these inventories.
“This comes as U.S. refineries head into the spring maintenance period, stoking fears that crude oil demand will be soft and stockpiles will continue to rise,” Reuters quoted ANZ bank as saying.
Meanwhile, the EIA’s weekly estimate for U.S. crude oil production showed that output jumped to a new record-high of 12.3 million bpd for the week ending April 26.
This record production, combined with U.S. inventories at their highest level in 19 months, weighed heavily on oil prices on Thursday.
“When the U.S. crude-oil warehouses bulge to their highest levels since September 2017, while production continues to set new high-water marks, warning signals should be flashing red,” Stephen Innes, head of trading at SPI Asset Management, told Bloomberg today.
In another bearish signal, Russian government data showed on Thursday that Russia’s oil production dropped in April from March, but missed, again, Russia’s target under the OPEC+ production cut deal. According to Reuters calculations of government data in tons, Russian production stood at 11.23 million bpd last month, down from 11.3 million bpd in March, but still not enough to meet Russia’s pledge to cut output to 11.191 million bpd.
