NEW YORK - U.S. prices fell more than 1% on Wednesday after crude inventories in the United States soared more than expected to their highest since September 2017 as production hit a new record of 12.3 million barrels per day.
The declines were somewhat tempered by the intensifying crisis in Venezuela, with the fall in the global Brent benchmark more muted.
Brent crude oil futures were down 42 cents, or 0.6%, to $71.64 a barrel by 11:16 a.m. EDT (1516 GMT). U.S. crude futures fell 83 cents, or 1.3%, to $63.08 a barrel
U.S. crude inventories climbed last week 9.9 million barrels to 470.6 million barrels, as production and imports grew and refining rates dropped, the Energy Information Administration said.
The figure far outstripped analysts' expectations of an increase of just 1.5 million barrels.
"To say that this increase in supply is shocking is an understatement," said Phil Flynn, an analyst at Price Futures Group in Chicago. “We're down after the number but we’re not killing it right now. I think one of the reasons for that is because there’s a lot of people wondering if this is going to be a one-off."
Markets were also watching Venezuela, where opposition leader Juan Guaido called for a May 1 uprising against President Nicolas Maduro. Many observers fear this could lead to escalating violence and further disruptions to crude supply, though Venezuela's oil-producing regions are far afield of the capital of Caracas.
The unrest adds to a range of fluid geopolitical factors which have been affecting oil prices in recent months.
Oil markets have tightened this year due to supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC) as well as the sanctions on Caracas and Tehran.
Washington is set to revoke waivers for select countries to import Iranian oil on Wednesday as it aims to drive Iran's crude exports to zero. It remains unclear whether Iran's top oil customer China will comply.
OPEC meets in June to discuss production policy. While Washington has demanded the group increase output to make up for the shortfall from Iran, OPEC's de facto leader Saudi Arabia said on Tuesday it had no immediate plan to do so.
"Recent comments from (Saudi Energy Minister Khalid) al-Falih confirm our view that the kingdom will respond cautiously with other oil producers and not pre-emptively ramp up production," said Giovanni Staunovo, analyst at UBS in Zurich.