Oil sinks 3.4% to hit the lowest close since January

Oil prices have dropped significantly as futures decline to their lowest close levels since the beginning of the year. The declines come as the U.S. government announced a sudden decline in crude stockpile in the nation.

The U.S Energy Information Administration announced that in the last week of May the U.S commercial crude inventories jumped by 6.8 million barrels. Refineries had increased efforts but the stockpiles still jumped with U.S. crude imports jumping by over 1 million barrels in a day.

An earlier report from the American Petroleum Institute had indicated that stockpiles had increased by 3.5 million barrels during the week. From a Reuters poll, analysts’ expectation was that stocks would decline by 849,000 barrels.

Following the report, U.S. West Texas Intermediate crude (WTI) dropped to $ 50.66, the lowest level reached since January 15. The West Texas Intermediate closed at $51.68 per barrel, a decline of $1.80 which is 3.4% the lowest achieved in about five months.

Other losers were Brent futures at $59.45 which went to its lowest level since January 15.

In the same week of May, U.S. gasoline inventories gained 3.2 million barrels. Stockpiles of home heating fuel, and diesel increased 4.6 million barrels.

As per EIA’s preliminary reading, the U.S oil production in a week rose significantly reaching an all-time high of 12.4 million barrels per day.

The report highlighting on stockpiles put pressure on oil prices causing a decline in the last week of May. That send shivers in the market as they prepared for the worst in the never-ending trade conflict between the two economic giants. Last week the U.S. president issued a threat that Mexican goods may also receive tariff hikes ending chills across the globe and fear of slowing economic growth and demand for fuel.

U.S. Stockpiles increase and the lower crude prices are coming at a time when OPEC together with its oil market contributors have planned for a meeting which should come up with production policy in the weeks to come. The OPEC and their allies decided to hoard oil supply from the beginning of the year with the aim of draining excess supply.