(Bloomberg) -- Oil fell to the lowest level in almost two months after swelling inventories in the world’s biggest economy added to a pessimistic and weakening economic backdrop.
Futures in New York declined 1.8% Wednesday. U.S. oil stockpiles rose by 3.1 million barrels last week, according to the U.S. Energy Information Administration. The increase exceeded the median forecast from analysts and was the biggest rise since May. The price decline was exacerbated by a slide in broader equity markets, fueling fears about the American economy slowing.
The U.S. benchmark crude has fallen about 16% from the peak reached on the first trading day after crippling aerial attacks damaged key Saudi Arabian oil installations. Speedy repairs by the Saudis dovetailed with signals of weakening global energy demand to undermine prices.
“The restoration of Saudi oil and demand destruction fears have the market in its grips today and today’s build in U.S. crude stocks doesn’t help that,” said Gene McGillian, manager of market research at Tradition Energy.
Meanwhile, domestic gasoline inventories dropped by 228,000 barrels despite forecasts for a 600,000-barrel increase.
Crude prices are now below where they were before the Sept. 14 attacks on Saudi Arabia that temporarily halved the kingdom’s production. The strikes slashed daily output from the Organization of Petroleum Exporting Countries by 1.6 million barrels a day last month, the biggest drop in 16 years, according to a Bloomberg survey.
Meanwhile, the S&P 500’s two-day slump reached the most in two months as private payrolls fell short of estimates a day after a manufacturing gauge slumped to the lowest in a decade.
“Crude markets remain tight, but the dominating force right now is simply the gloomy economic-demand outlook,” analysts at consultant JBC Energy GmbH said. The oil market has “so many things to worry about.”
West Texas Intermediate for November delivery fell 98 cents to settle at $52.64 a barrel on the New York Mercantile Exchange.
Brent for December settlement slipped $1.20 to $57.69 on the ICE Futures Europe Exchange. The global benchmark crude traded at a $5.18 premium to WTI for the same month.
--With assistance from Jacquelyn Melinek, Grant Smith, James Thornhill, Sharon Cho and Robert Tuttle.
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