NEW YORK – Oil fell a dollar Wednesday to the lowest level in more than three months as robust U.S. inventories at the end of the summer driving season further dulled bullish sentiment.
U.S. crude futures settled down $1.10 to $67.50, after slumping as low as $67.45, the lowest since May 22. London Brent crude dropped $1.16 to $66.93, bringing it well below its Aug. 8 peak of $78.65, hit on geopolitical worries and expectations for an active hurricane season.
"We're not hyperventilating over Nigeria, Israel or Iran. We've run out of adrenaline and what we're left with are inventories that are higher than a year ago and a hurricane season that has been more fizzle than sizzle." said Tim Evans of Citigroup Global Markets.
Click here to visit FOXBusiness.com's Energy Center.
U.S. crude inventories are around 6 percent higher than a year ago and the surplus is likely to widen dramatically due to the absence of a damaging hurricane in the Gulf of Mexico.
Last year's Hurricane Katrina slashed more than 6 million barrels from commercial crude inventories leading into early September after the powerful storm toppled offshore rigs and destroyed undersea pipelines.
Analysts polled by Reuters estimated that crude supplies eased last week by 1.3 million barrels, while stockpiles of distillates like heating oil, jet fuel and diesel built by 1.3 million barrels.
Energy traders tend to shift their focus from gasoline to heating oil after the Labor Day holiday, the traditional end to the summer driving season. The U.S. government will release its inventory data on Thursday, a day later than normal because of the holiday.
Analysts added the crude oil market was technically vulnerable following last week's break through the $70 a barrel mark and a convincing breach of the next key levels could herald an even deeper decline.
Diplomatic efforts to try to resolve Iran's dispute with the West have also eased worries of possible disruption of the OPEC producer's exports. Iran failed to meet an Aug. 31 deadline to halt uranium enrichment or face the threat of sanctions, but traders are not expecting swift action.
Anxiety hurricanes could shut in U.S. oil and gas infrastructure has also ebbed after a relatively gentle Atlantic season so far, and as key forecasters cut their hurricane outlooks.
Hurricane watchers at Colorado State University and WSI Corp. recently reduced the number of named storms they expect this year to 13, compared with the record 28 in 2005.
The sixth tropical storm of the Atlantic hurricane season Florence formed in the distant Atlantic on Tuesday and could become a hurricane, the U.S. government said. But on its current track, it did not appear to pose any threat to oil and gas facilities.
Get all the stories you need-to-know from the most powerful name in news delivered first thing every morning to your inbox