Oil Prices Tumble Almost $2 a Barrel

The price of oil dropped almost $2 a barrel to a three-month low on Wednesday after government data showed U.S. crude stocks rose more than expected, marking their 13th increase in 14 weeks.

The U.S. Department of Energy reported that inventories of crude rose to 334 million barrels in the week ended Friday, up 4.3 million barrels from the previous week and 34 million barrels higher than the level recorded a year earlier.

“It seems like every barrel around the world, hiding under every rock, has come to America in these past weeks,” said Phil Flynn, analyst at Alaron Trading Corp. in Chicago.

Light, sweet crude futures for June delivery fell $1.72 to settle at $47.25 a barrel on the New York Mercantile Exchange.

“Overall, we’re in a downtrend, so it doesn’t take much to trigger fresh selling,” said Ed Silliere, vice president of risk management at Energy Merchant.

Heating oil futures slipped more than a penny to $1.358 a gallon, while gasoline futures fell more than 2 cents to $1.414 a gallon.

The overall inventory report was a mixed bag, with oil derived products building at a slower clip than anticipated.

“It’s not the type of report that is going to satisfy the bears or the bulls,” Flynn said.

Gasoline stocks rose 1.1 million barrels to 214.8 million barrels and heating oil stocks rose 200,000 barrels to 38.1 million. Meanwhile, total distillates fell 200,000 barrels to 103.8 million.

Also, the report showed that U.S. refiners ran at 94% of capacity, up from 91.8% a week earlier. Such a high use of capacity could be a cause for concern, because gasoline demand is likely to rise this summer, Flynn said. “What are we going to do when demand gets stronger?” he said.

There are also worries about possible refinery outages when production of heating oil is due to increase to prepare for winter.

Saudi Arabian Oil Minister Ali Ibrahim Naimi also said a possible shortfall in refinery output, not supplies, was the main concern.

“I stand here to tell you that Saudi Arabian reserves are plentiful, and we stand ready to raise output as the market dictates,” Naimi said Tuesday in Washington. “The refinery bottlenecks are the problem.”

Frederic Lasserre, head of commodity research at SG Securities in Paris, said Naimi was “right in terms of the global picture.” But Lasserre said gasoline prices in America “do not present a picture of tightness in the U.S. market,” adding that capacity utilization at U.S. refineries “can easily go up to 97 or 98%.”

Crude prices have fallen more than $10 from an all-time high of $58.28 on April 4, but prices remain about 15% higher than a year ago.