(Bloomberg) -- Oil was on track for its worst monthly loss this year after a smaller-than-expected withdrawal from U.S. storage facilities fueled worries about weakening demand.
Futures tumbled 3.8% in New York on Thursday, extending May's loss to 11%, after the U.S. Energy Information Administration said domestic inventories shrank by 282,000 barrels last week, just one-fifth the average estimate in a Bloomberg survey. Meanwhile, American gasoline stockpiles expanded for the second straight week despite the onset of the summer driving season in the U.S.
After starting 2019 on a tear because of OPEC's production cuts, gaining more than 45% through late April, oil has lost 14% since then amid concerns that the escalating U.S.-China trade war will crimp energy consumption. That's overwhelmed supply risks in the oil-rich Persian Gulf posed by rising tensions between America and Iran, raising volatility for crude markets.
“The concern revolves around the demand side of the equation," said Nick Holmes, who helps oversee $16 billion in energy investments for Kansas-based money manager Tortoise. “This report, with the gasoline build at this time of the year, continues to stoke those fears."
West Texas Intermediate crude for July fell $2.22 to $56.59 a barrel on the New York Mercantile Exchange, the lowest close since March 8. Brent for July settlement fell $2.58, or 3.7%, to $66.87 a barrel on London's ICE Futures Europe exchange.
The EIA report added to lingering anxieties about a torrent of American crude undercutting fragile demand. U.S. production ticked up for a second straight week to 12.3 million barrels a day. Gulf Coast gasoline supplies, meanwhile, rose to their highest seasonally adjusted level in data going back to 1992, despite a slight increase in refinery activity. That overshadowed a rise in U.S. crude exports.
“It's notable that we were able to generate an increase in gasoline inventories" even with the pickup at refineries, said John Kilduff, a partner at hedge fund Again Capital LLC. The combination “will be seen as a bearish factor for the market and continue to help push prices lower."
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--With assistance from Grant Smith, Saket Sundria and Caleb Mutua.
To contact the reporter on this story: Alex Nussbaum in New York at anussbaum1@bloomberg.net
To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Carlos Caminada, Joe Carroll
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