WTI sinks following bearish EIA report

West Texas Intermediate plunged more than 2% on Wednesday after the Energy Information Administration reported a much bigger than expected increase in U.S. crude oil stockpiles last week. A continuing government shutdown and unresolved deadlock in negotiations to raise the nations debt limit continued to curb demand prospects.

On the New York Mercantile Exchange, WTI crude for delivery in November fell by 1.65% to $101.78 per barrel at 14:55 GMT. The American benchmark fell to a session low of $101.41 per barrel minutes after the release of the data, the the weakest level since October, while days high remained at $103.75 a barrel. The contract rose by 0.5% on Tuesday but extended its weekly decline to 1.8% following Wednesdays retreat.

Meanwhile on the ICE, Brent futures for settlement in November traded at $108.70 per barrel at 14:56 GMT, down 1.33% on the day. Prices shifted in a days range between $110.28 and $108.22 per barrel. The European benchmark rose by 0.50% on Tuesday but fell by 0.55% on weekly basis after Wednesdays plunge.

Oil prices fell sharply on Wednesday after the Energy Information Administration said in its weekly crude oil inventories report that U.S. crude stockpiles rose by 6.8 million barrels in the week ended October 4. Analysts surveyed by Bloomberg expected a moderate 1.6 million increase. U.S. stockpiles now totaled 370.5 million barrels, the highest since July 5, and were above the upper range for this time of the year. Refinery utilization plunged to 86% from 89% in the preceding week, underperforming economists expectations for a 1% drop. Crude oil imports averaged 8.0 million barrels per day last week, down by 320 000 bpd from the preceding five-day period.

The report also showed that motor gasoline production increased from the previous week, while distillate fuel output fell, averaging 9.2 million and 4.6 million barrels per day respectively. Motor gasoline inventories rose by 0.149 million barrels last week and were at the top of the average range for this time of the year. Analysts surveyed by Bloomberg expected a 1.1 million barrels increase. Meanwhile, distillate fuel inventories fell by 3.14 million barrels and remained in the lower limit of the average range. Economists expected a 1.2 million decrease.

Bill Baruch, a senior market strategist at Iitrader.com in Chicago, said for Bloomberg: “The bears are in control now. Growth may be handicapped by the government shutdown and there is demand worry.”

Oil was also pressured by a stronger dollar, which surged after a White House representative announced that President Obama will nominate the Fed stimulus program’s key architect, Janet Yellen, as the person to replace Ben Bernanke as Fed Chief after his term expires on January 31.

The dollar index, which measures the greenback’s performance against six major trading partners, rose by 0.53% to 80.50 by 14:57 GMT. The December contract surged to a session high of 80.54, the strongest level since September 27, while day’s low stood at 79.96. The U.S. currency gauge rose by 0.1% on Tuesday and rebounded to positive territory on weekly basis after Wednesday’s advance. Strengthening of the greenback makes dollar-denominated commodities more expensive for foreign currency holders and limits their appeal as an alternative investment.