By Barani Krishnan
Investing.com – Crude futures tumbled more than 3% Wednesday, reversing most of the previous day’s gains, after the U.S. Energy Information Administration reported a crude inventory build for a second week in a row, disappointing oil bulls banking on a decline.
New York-traded settled down $1.87, or 3.3%, at $55.23 per barrel, after rising 4% in the previous session.
London-traded , the benchmark for oil outside of the U.S., fell back below the key $60 per barrel mark. Brent tumbled $1.82, or 2.97%, to $59.48, after rallying 4.6% on Tuesday
The EIA reported a 1.6-million-barrel crude build in the week to August 9 versus market expectations for a 2.8-million-barrel draw.
The agency also reported deeper drawdowns in gasoline and distillates than expected by the traders and analysts, but that wasn’t enough to turn the market around. The EIA said decreased by 1.4 million barrels, compared to expectations for a build of 30,000 barrels. fell by 1.9 million barrels, compared to forecasts for a gain of 990,000 barrels.
While the peak summer driving period in the United States isn’t regarded as over until Labor Day, Sept. 2, EIA data of the past two weeks are indicating that the runaway demand for crude seen over the past two months is starting to dry up.
The crude build in the latest EIA report shows “last week wasn’t a fluke,” said Matt Smith, analyst at Clipperdata, a crude cargo tracking firm in New York. In the previous week to August 2, crude stockpiles rose by 2.4 million barrels. That ended seven consecutive weeks of draws totaling nearly 50 million barrels.
A return of heightened global economic worries also has pressured oil.
The yield on the fell below that of the , inverting the yield curve for the first time since 2007.
“It’s a fairly good indicator for a recession to take place within a year if that inversion holds,” said Tariq Zahir, managing member at oil-focused hedge fund Tyche Capital Advisors in New York.
“Couple that along with an unresolved China trade tariffs going higher, and you could have an implosion in crude prices coming,” Zahir added.
Oil had already been plummeting ahead of the EIA data release, following weak economic data in Asia overnight.
Chinese industrial output growth hit its lowest level in 17 years, data showed, while the German economy contracted in the second quarter.
Oil has also been dogged by volatility this month, with the U.S.-China trade war yanking crude prices around like a yo-yo.
Until Wednesday’s reversal, WTI had gained more than 11% since Aug. 7, its strongest four-day rebound since December 2016. rose almost 9% in the same period.