WASHINGTON, D.C. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange moved sharply lower Wednesday. West Texas Intermediate settled at a nearly five-month low after government data showed a larger-than-expected build in U.S. crude inventories, while fear of slowing global growth added to losses.
NYMEX July WTI futures moved down $1.80 to finish the session at $51.68 bbl, the lowest price settlement since mid-January. ICE August Brent futures dropped $1.34 to settle at $60.63 bbl, also the lowest value in nearly five months. NYMEX July RBOB futures sank 3.14cts to $1.6928 gallon, a more than three-month spot low settlement. July ULSD futures ended the session 4.15cts down at $1.7800, a five-month spot low settlement.
Oil futures were slammed Wednesday in response to a bearish weekly supply report showing across-the-board builds in U.S. commercial crude and products inventories, while domestic production reached a new record high.
The Energy Information Administration reported a larger-than-expected 6.8 million bbl increase in commercial crude stocks, lifting inventory to better than a 22-month high during the week ended May 31. Government data also showed domestic crude output jumped 100,000 bpd in the last week of May to a fresh record high of 12.4 million bpd, while monthly output rate averaged 13.9% above the comparable period a year ago.
EIA report was particularly bearish for refined products, detailing much larger-than expected builds in both gasoline and distillate inventories for the profiled week.
U.S. gasoline stocks jumped 3.2 million bbl, with gasoline inventory registering a steep 9.1 million bbl increase from May 11 to May 31. Distillate inventories gained 4.6 million bbl, while implied demand in the profiled week plunged 895,000 bpd to reach one of the lowest weekly demand rates of 2019.
Demand weakness for distillates aligns with weakening manufacturing in the United States, with the Institute of Supply Management reporting an unexpected 0.7% decline in the U.S. manufacturing index during May to a 52.1 32-month low.
The sharp increases in U.S. oil inventory heightened concern over potential lost demand amid the U.S. trade fight with China and threatened tariffs on imports from Mexico, and follow the World Bank's projection released Tuesday that global economic growth would slow to a less than expected 2.6% this year from 3% in 2018.
"Emerging and developing economy growth is constrained by sluggish investment, and risks are tilted to the downside. These risks include rising trade barriers, renewed financial stress, and sharper-than-expected slowdowns in several major economies," said the World Bank.
Several analysts continue to note a strong underlying U.S. economy despite the threat from increased tariffs from China, with that view supported by the Federal Reserve's Beige Book released Wednesday afternoon finding a "slight improvement" in regional economic activity from April through mid-May against the previous six-week period. "Almost all districts reported some growth, and a few saw moderate gains in activity."
Equity indexes added to gains following the Beige Book release, ending higher for a second straight session following Tuesday's explosive rally sparked by comments from Federal Reserve Chairman Jerome Powell signaling a rate cut should the economy slow amid trade tensions. A majority in the market are now expecting two rate cuts in the federal funds rate now at 2.25% to 2.5% before year end.
The U.S. dollar, which weakened to a 96.655 seven-week low in early index trading, testing support at the 100-day moving average, reversed higher, ending the session up 0.252 at 97.251.
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