Oil Drops to 3-Week Lows on Stock Build and Easing Tensions

VIENNA (DTN) -- Oil futures closest to expiration on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange continued to slide Thursday morning, after the Energy Information Administration on Wednesday reported a larger-than-expected build to U.S. crude oil stockpiles.

The EIA reported commercial crude oil inventories in the U.S. increased 2.7 million barrels in the week ending April 12. Despite the combined 4.7 million bbl draw to gasoline and distillate inventories, total commercial petroleum stocks surged 10 million bbls last week, as builds to crude and a 1 million bbl build to jet fuel stocks came alongside a 7.5 million bbl surge in "other oils" stocks.

Oil futures have now shed all gains since the Israeli attack on an Iranian consulate on April 1. Their time structure also indicates worries over near-term threats to supply have receded. Brent's forward curve has flattened since early April, with the prompt spread falling back below $0.60 bbl from $1.07 bbl on April 5.

The U.S. Treasury Department on Wednesday announced it won't renew a license allowing for Venezuelan oil exports, de facto reinstating full sanctions. Over the past six months, this sanctions easement has allowed Venezuela to ramp up production and exports.

Markets shrugged off this expected development. Near 7:30 a.m. EDT, WTI futures for May delivery were down $0.46 bbl to trade near $82.23 bbl, and Brent for June delivery fell $0.51 bbl to $86.78 bbl. RBOB for May delivery dropped $0.0256 gal to $2.7031 gal, while ULSD for May delivery traded near $2.5440 gal, down $0.0307 gal.

Karim Bastati can be reached at karim.bastati@dtn.com