Oil futures sank about 1% on Wednesday after U.S. crude inventories in the United States soared more than expected to their highest since September 2017 as production hit a record high of 12.3 million barrels per day.
The declines were somewhat tempered by the intensifying crisis in Venezuela and Washington`s stopping Iranian oil sanction waivers as of May 1, with the fall in the global Brent benchmark more muted.
Brent crude oil futures were down 35 cents, or 0.5%, at $71.71 a barrel by 1:01 p.m. p.m. EDT (1701 GMT). U.S. West Texas Intermediate crude futures (WTI) fell 67 cents, or 1.1%, to $63.24 a barrel.
U.S. crude inventories climbed last week 9.9 million barrels to 470.6 million barrels as imports grew to their highest since January and refining rates dropped below 90 percent of total capacity, the Energy Information Administration said.
The build far outstripped analysts` expectations of an increase of just 1.5 million barrels.
"A drop in refining activity and a rise in imports has helped propel crude inventories to another large build," said Matt Smith, director of commodity research at ClipperData. "The vast majority of the build was on the U.S. Gulf Coast - with refinery runs ticking lower and waterborne imports on the rise."
Markets also watched for developments in Venezuela, where opposition leader Juan Guaido called for a May 1 uprising against President Nicolas Maduro.
Many observers feared the rallying cry could lead to escalating violence and further disruptions to crude supply, though the OPEC-member nation`s oil-producing regions are far afield of the capital of Caracas.
The unrest adds to a range of fluid geopolitical factors which have roiled the oil market in recent months.
Oil prices have risen over 30% so far this year, and in April, Brent increased about 6.5% and WTI rose 6.3%, their fourth consecutive month of gains.
The market has tightened this year due to supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC) as well as the sanctions on Caracas and Tehran.
Washington last week said no waivers on the Iranian oil sanctions would be granted after Wednesday, but remains unclear whether Iran`s top oil customer China will comply.
OPEC meets in June to discuss production policy. While Washington has demanded the group increase output to make up for the shortfall from Iran, OPEC`s de facto leader Saudi Arabia said on Tuesday it had no immediate plan to do so.
"Recent comments from (Saudi Energy Minister Khalid) al-Falih confirm our view that the kingdom will respond cautiously with other oil producers and not pre-emptively ramp up production," said Giovanni Staunovo, analyst at UBS in Zurich.
(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)