Oil prices tumble to seven-week lows on surprise build in U.S. crude stocks (NYSEARCA:USO)

Crude oil futures fell to their lowest in seven weeks Wednesday following U.S. data that showed a surprise and sharp weekly build in crude stocks, as exports fell and refineries reduced their capacity use.

The U.S. Energy Information Administration reported commercial crude oil stockpiles rose by 7.3M barrels during the week ended April 26, their largest weekly increase since February and a wide divergence from a 1.1M-barrel withdrawal analysts forecast in a Reuters survey.

“The crude build is a big one. At this time of year, we should be drawing down on crude oil as more barrels go through the refinery,” Mizuho’s Robert Yawger told Reuters.

The EIA also reported a surprise 300K-barrel build in gasoline inventories, compared to expectations for a 1.2M-barrel draw.

“Potential supply side support” came from an uptick in the implied measure of consumer gasoline demand, as gasoline supplied rose a modest 195K bbl/day from a two-month low, Sevens Report Research co-editor Tyler Ritchie told MarketWatch, but that statistic “lacked conviction” as the four-week average fell 317K bbl/day to 8.58M bbl/day, which suggests “consumer fuel demand is continuing to deteriorate.”

Traders also continued to monitor negotiations for a ceasefire between Israel and Hamas, which have at least temporarily eased concerns over potential disruptions to oil flows in the Middle East.

Front-month Nymex crude (CL1:COM) for June delivery closed -3.6% to $79.00/bbl, and front-month July Brent crude (CO1:COM) finished -3.3% to $83.44/bbl, the lowest settlement for both benchmarks since March 12 and the largest one-day dollar and percentage decline since January 8.

ETFs: (NYSEARCA:USO), (BNO), (UCO), (SCO), (USL), (DBO), (DRIP), (GUSH), (NRGU), (USOI)

Oil takeaway capacity from the Permian Basin is expected to tighten next month due to scheduled pipeline maintenance, which already is driving up the premium for delivered WTI into East Houston to the highest in nearly three years, Reuters reported.

Exxon’s (XOM) 642-mile Wink to Webster pipeline, which ships more than 1M bbl/day of crude and condensate from the Permian to the Gulf Coast, is due for downtime in June for a 10-day scheduled maintenance period.

The spread between WTI crude and the same grade delivered to Magellan’s East Houston terminal hit its widest point on Monday at a $1.25/bbl premium, the widest since June 2021, according to LSEG data.