NEW YORK – Oil dropped 7 percent to below $66 a barrel on Wednesday after a US government report showed fuel stockpiles growing as demand in the world's top consumer slowed further.
US crude settled down $5.23 to $65.30 a barrel while Brent crude lost $4.57 to settle at $61.87 a barrel.
Vehicles in line at a New Jersey toll booth in a file photo. [Agencies]
US gasoline stocks rose by 1.1 million barrels last week, against analyst forecasts of a draw, as demand for the fuel fell 2.3 percent over four-week period to October 31, the Energy Information Administration said.
"The data looks bearish on most fronts with product supplies building more than expected as refinery activity held firm at the prior week's level," said energy analyst Jim Ritterbusch.
Crude prices have tumbled by about half from a record high of $147.27 a barrel in July as the global credit crisis hit the wider economy, damping fuel demand in major consumer nations.
US stocks fell as worries about the weakening global economy returned to the fore, a day after the US presidential election.
Democrat Barack Obama's first day as president-elect was marked by reports of deep cuts in employment by private employers, possibly foreshadowing weakness in the government's employment report on Friday.
Oil had surged $6.62, or 10.36 percent, on Tuesday, the largest one-day gain since September 22, on signs Saudi Arabia and other OPEC members had made cuts in oil exports, in compliance with an agreement last month aiming to stem the slide in oil prices.
The EIA said it expected OPEC production to be cut by 1.1 million barrels a day by January, representing about 70 percent of the planned 1.5 million barrel per day cut agreed by OPEC last month.
In its weekly review of the oil market, the EIA said this would be higher than the usual 50 percent compliance with previous cuts. OPEC member Angola said on Wednesday it had implemented its share of the supply curbs.
US total oil product demand in the past four weeks fell 6.7 percent from a year ago to 19.10 million barrels per day, the EIA reported.
US crude inventories were unchanged, against analysts expectations of a 1.1-million-barrel increase.
But crude stocks rose by a hefty 1.8 million barrels at Cushing, Oklahoma, the delivery point for US crude futures, while distillate inventories rose by 1.2 million barrels.
Early pressure on crude came after Obama's victory in the US presidential election boosted the US dollar. The dollar later fell against the yen but retained gains against the euro.
A firmer dollar makes oil more expensive for holders of other currencies and tends to pressure the crude price lower.