Oil prices tank as US weekly crude inventories rise unexpectedly

Oil prices tanked on Wednesday after official data showed an unexpected increase in US weekly crude inventories.

The Energy Information Administration said crude inventories rose 2.5m barrels to 523.6m barrels in the week to 19 August. It compared to expectations for a 500,000 drop in barrels.

Brent crude plunged 1.6% to $49.14 per barrel and West Texas Intermediate slumped 2.5% to $46.91 per barrel at 1600 BST, following the release of the data.

During the same week, gasoline inventories were flat, while those of distillates edged up by 100,000 barrels and stocks of propane/propylene fell by 2.4m barrels.

Imports increased by 449,000 barrels a day from the previous week.

Oil prices were already under the cosh prior to the EIA data after a report from the American Petroleum Institute showed crude stockpiles rose by 4.46m barrels last week against an expected draw-down of 850,000.

The most recent data from the EIA added to worries about a global supply glut that has dampened prices.

“Crude oil has been amongst the most volatile markets this week as investors prepare themselves for Janet Yellen’s speech on Friday at the Jackson Hole Economic Symposium,” said David Morrison, senior market strategist at Spread Co.

“On Tuesday it whipsawed from negative to positive territory on a story that Iran was prepared to 'support joint action to prop up the oil market'. However, this headline missed out on another crucial quote from the (anonymous) source which said that even if an agreement was reached to freeze output, there was very little chance that anyone would stick to it.”

Traders are hoping for a deal on stabilising the market at next month’s unofficial OPEC meeting in Algiers. However, few analysts expect an agreement will happen given Iran’s reluctance to curb production following the lifting of its sanctions.