A rout in oil prices deepened Wednesday after government data showed an unexpected increase in stockpiles, triggering fresh worries that demand for fuel is weakening alongside the U.S. economy.
U.S. crude futures fell 4.7% to $51.09 a barrel on the New York Mercantile Exchange—their lowest close since mid-January. They have dropped 13% so far in August, their worst start to a month in four years, according to Dow Jones Market Data.
Brent crude, the global gauge of prices, declined 4.6% to $56.23 a barrel on the Intercontinental Exchange. The move comes a day after Brent joined U.S. crude in bear-market territory—down more than 20% from its year-to-date peak.
The slide in oil highlights the anxiety about the world economy that continues to jolt financial markets. U.S. crude tumbled nearly 8% in a single session last week after President Trump announced fresh tariffs on about $300 billion of Chinese imports, spurring worries that consumers will limit spending and economic growth will stagnate.
“The oil market is telling us the uncertainty here is significantly higher than several weeks ago,” said Rob Thummel, senior portfolio manager for Tortoise Capital Advisors. “Investors are looking for ways to take risk off the table.”
Those fears were reflected in the latest Energy Information Administration crude-inventory data, which showed stockpiles rose 2.4 million barrels last week. They stand 2% above their five-year average for this time of year, indicating there is plenty of oil available. Analysts and traders surveyed by The Wall Street Journal had expected inventories to fall 2.8 million barrels.
A drop in U.S. crude exports also raised anxiety about weakening consumption.
“It’s a combination of the same factors weighing on prices in recent days: trade-war concerns, less economic growth, less oil-demand growth, and on top of that today we’ve had EIA data that are bearish and certainly not helping matters,” said Giovanni Staunovo, a commodity analyst at UBS Wealth Management.
The rise in oil stockpiles for the week ended Aug. 2 ended a streak of seven consecutive weekly declines that had helped support crude despite oversupply worries. Stockpiles tend to drop in the summer amid healthy demand during the summer driving season, so some analysts are wary of more bearish increases moving forward.
An inventory rise earlier in the year helped send West Texas Intermediate, the U.S. oil-price benchmark, into a bear market in early June. It has now been in a bear market for two months.
Although prices are still up solidly in 2019, they are now down about 25% in the past 12 months, a boon for U.S. consumers who are paying less on average for gasoline at the pump this summer.
The latest developments in the oil-price rout are increasing pressure on the Organization of the Petroleum Exporting Countries and its allies, who are already curbing output but have been unable to buoy prices as demand fears mount.
Oil stockpiles in Organization for Economic Cooperation and Development countries have already been rising this year, and projections that supply will grow one million barrels a day more than demand in 2020 have added to bearish sentiment, analysts say.
“There’s been a steady accumulation of supply on the market—the supply figures are so high I can’t believe my eyes,” said Georgi Slavov, head of research at Marex Spectron.
Write to Amrith Ramkumar at email@example.com and David Hodari at David.Hodari@dowjones.com
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