U.S. oil prices fell sharply in early Thursday trading, dropping more than $1 as newly released data revealed a larger-than-expected build in domestic crude inventories, sparking fresh concerns over a potential oversupply.
According to the Energy Information Administration (EIA), U.S. crude inventories rose by 3.5 million barrels last week, pushing total stockpiles to 441.8 million barrels. This sharply contrasts with analysts’ expectations in a Reuters poll, which had projected a drawdown of 1.1 million barrels.
Reinforcing the EIA’s data, the American Petroleum Institute (API) reported earlier this week that crude inventories surged by 4.3 million barrels, further validating concerns that supply may be outpacing demand in the near term.
West Texas Intermediate (WTI) crude for June delivery dropped $1.21, or 1.9%, to $61.94 per barrel. The benchmark crude also declined by 0.8% on Wednesday, extending its weekly losses.
The unexpected inventory build has raised red flags among traders and investors who are now worried that rising supply levels could overwhelm market demand. Some fear this could lead to prices breaking below the key support level of $60 per barrel if the trend continues.
Meanwhile, the Organization of the Petroleum Exporting Countries and its allies (OPEC+) have continued to boost production in recent months. However, in its latest monthly report released Wednesday, OPEC lowered its forecast for oil supply growth from non-OPEC+ countries, including the United States, signaling some caution about future output trends.
Despite OPEC’s slightly cautious outlook, the market remains focused on the immediate pressure from U.S. inventories, which seem to be rising faster than expected. The situation has triggered increased volatility in energy markets, as traders reassess the short-term supply-demand balance.
Still, some observers believe that unless global demand weakens significantly or geopolitical tensions flare up, oil prices could find support near current levels, preventing a deeper slide.
