Oil prices skid as traders worry there’s a fuel glut

NEW YORK, N.Y. – Oil prices fell nearly 5 per cent on Thursday after a government report on fuel stocks reinforced worries about an oil glut.

The report said that crude inventories are declining at a slower pace than expected. Stockpiles of oil and gasoline remain high, even though people drive more during the summer. A country awash in fuel has stalled an oil-price rally that began in February.

The Energy Information Administration said Thursday that inventories fell by 2.2 million barrels to 524.4 million barrels last week. S&P Global Platts had forecast a decline of 2.6 million barrels, while the American Petroleum Institute estimated a drop of 6.7 million barrels.

Gasoline stockpiles also declined by less than Platts expected. They had risen the week before, pointing to production that is outpacing even the stronger demand for gas in summer.

Benchmark U.S. crude slid $2.29, or 4.8 per cent, to settle at $45.14 on the New York Mercantile Exchange. Brent crude, the international price, fell $2.40, or 4.9 per cent, to $46.40 a barrel.

Oil prices skidded to a 13-year low in February but have since rebounded by more than 70 per cent.

There are fewer new wells coming into service. That means overall production is likely to continue falling, but only gradually. That is likely to push prices higher.

Producers in U.S. shale formations from Texas to the Northeast have reduced output, and pumping has been interrupted in some foreign fields.

The American Petroleum Institute estimated that in the second quarter, the number of completed U.S. oil wells — those that drillers had finished making and were ready to produce oil or gas — plunged by 69 per cent in the second quarter compared with a year earlier. That’s a sign that domestic production is likely to continue slipping.