LONDON – Oil fell sharply on Wednesday on a larger-than-expected rise in U.S. gasoline and distillate stocks, overshadowing supply concerns in Iran, Russia and Nigeria.
U.S. government data showed domestic gasoline supplies up a surprising 3.2 million barrels last week, beating expectations for a 1.3 million build.
"The gasoline build is substantial and it confirms the price weakness we've been seeing over the last several days," said Tim Evans of IFR Energy Services.
U.S. distillate stocks, which include heating oil, also rose a larger-than-expected 1.8 million barrels.
Crude stocks fell by 2.3 million barrels last week. Analysts had forecast a 1.1 million barrel increase.
"Even with the crude draw, we still have a lot of it with supplies still above normal," said Marshall Steeves of Man Financial Global Research.
Adding to weakness, producer group OPEC appeared unlikely to decide on a cut to production at its meeting next week.
"At over 60 (dollars per barrel), I don't know by what arithmetic I'm going to be cutting production," said OPEC President Edmund Daukoru, also Nigeria's Minister of State for Petroleum, on his arrival at the World Economic Forum.
OPEC kingpin Saudi Arabia has also said a cut is unlikely.
However, bearish sentiment was seen limited due to continuing geopolitical risks.
Tensions over Iran eased slightly with Iran and Russia holding talks that were expected to cover Moscow's proposal that it control Iranian uranium enrichment as a means to defuse Western suspicions over Tehran's nuclear ambitions.
The foreign ministers of the U.N. Security Council's five permanent members and Germany will meet in London on Monday to try to agree on how to tackle Iran's nuclear programme, a senior diplomat said.
EU Energy Commissioner Andris Piebalgs said he did not believe the world's fourth biggest crude exporter would use oil as a weapon in the dispute. But if it did, the world community had measures to deal with such a disruption, he said.
However, threats of supply cuts remain on traders' minds with continued attacks in Nigeria and delays in resolving a gas dispute between Russian and Ukraine.
The signature of agreements sealing a deal on the supply of Russian gas to Ukraine at sharply increased prices has been postponed again pending further talks, Ukraine's Prime Minister Yuri Yekhanurov said on Wednesday.
Russian gas giant Gazprom briefly cut supplies to Ukraine in the New Year during a tense contract dispute, affecting shipments to anxious customers throughout Europe.