Oil tumbled after the Energy Department said U.S. stockpiles surged the most since 2008 as U.S. crude output climbed to the highest level in 12 years.
Futures fell as much as 2.7 percent as inventories rose 9.01 million barrels to 362.4 million in the seven days to March 30, the most since June. U.S. output rose 2.9 percent to 6.05 million barrels a day, the most since 1999.
“This was a very big build and the market reacted,” said Todd Horwitz, chief strategist at Adam Mesh Trading Group in New York. “We’re going to probably test $100 in the next week and go lower.”
Crude oil for May delivery fell $2.53, or 2.4 percent, to $101.48 a barrel at 11:14 a.m. on the New York Mercantile Exchange. Futures touched $101.20, the lowest level since Feb. 16. The contract traded at $102.78 a barrel before release of the inventory report at 10:30 a.m.
Inventories were projected to increase 2.5 million barrels, the highest since August, according to the median estimate of 11 analysts surveyed by Bloomberg.
Oil also fell after the Federal Reserve signaled it may refrain from further monetary accommodation unless the economy falters or prices rise at a rate slower than its 2 percent target, according to the minutes of its March 13 policy meeting released yesterday. Fed Minutes
“There were a lot of people expecting further monetary stimulus,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “The Fed poured cold water on that.”
The central bank also affirmed its plan, first announced in January, to hold interest rates near zero through late 2014 as the economy’s improvement may not be sufficient to lower the outlook for coming years.
The Institute for Supply Management’s index of non- manufacturing industries, which account for almost 90 percent of the U.S. economy, fell to 56 in March from 57.3 a month earlier. The Tempe, Arizona-based group’s measure was projected to drop to 56.8, according to the median forecast of 69 economists surveyed by Bloomberg. Readings above 50 signal growth and the index averaged 53.3 since the recession ended in June 2009 through February.
