Brent crude oil fell by almost $2 on Wednesday after a new build in U.S. crude stock levels put a global glut back in focus, cutting short a four session rally that pushed prices up to a high of $59 on Tuesday.
The recent rebound had increased speculation that prices may have hit a bottom, after a seven-month rout slashed oil futures by nearly 60 percent and prompted major energy firms to cut spending on new production.
But a report from the industry group American Petroleum Institute showing U.S. crude stocks rose more than 6 million barrels last week pushed prices down on Wednesday.
Brent LCOc1 was $1.90 lower at $56.01 a barrel by 1440 GMT (09:40 a.m. EST), after reaching an intraday high of $59 on Tuesday and off a near six-year low of $45.19 reached in mid-January. U.S. crude CLc1 futures were down $2.50 at $50.55 a barrel.
“We believe that despite the strength of the recent rally, crude oil prices have not yet bottomed and we are not yet at the start of a sustained price recovery.” said analysts at Macquarie Capital in a note, citing a short term supply glut in the first half of the year.
The fall in prices “makes perfect sense after the marked increase since Friday. A degree of reversal should be expected given stock builds globally,” said Gareth Lewis-Davies, senior oil strategist at BNP Paribas
The U.S. government’s Energy Information Administration (EIA) is expected to release its data on stocks at 1530 GMT (10:30 a.m. EST) on Wednesday.