Oil hits a low as US fuel stock build signals easing demand

Oil fell two per cent to its lowest in more than two weeks yesterday after a sharp rise in US inventories of refined fuel suggested demand may be flagging, while crude production hit another weekly record.

Government data showed US crude stocks fell 5.6 million barrels, more than expected, which was partially the result of the closure of the Keystone pipeline after a leak in South Dakota in mid-November that cut flows to Cushing, Oklahoma. That line reopened Tuesday.

However, gasoline stocks rose by 6.8 million barrels and distillate inventories were up 1.7 million barrels, both exceeding expectations in a Reuters poll. That hit prices of both crude and products in a market which is already heavily tilted bullish and thus potentially vulnerable to a selloff, analysts said.

Gasoline stocks tend to build in December, but at 221 million barrels of inventory, stocks are slightly above the five-year average for this time of year. “Gasoline inventories are also now building as demand eases back even in the face of decent export numbers... Gasoline futures have clearly broken technical support levels and ULSD [diesel] futures are testing them,” said David Thompson, executive vice...