The prices of oil went down on Wednesday continuing where it left off on the previous day, as the huge increase in the inventories of U.S. fuel and a declining Chinese demand hinted that the global oil markets are still oversupplied regardless of the efforts by OPEC to cut output.
Futures contracts for the global benchmark for oil prices, Brent crude traded down 0.9 percent or 51 cents at $54.54 per barrel.
U.S. West Texas Intermediate crude went down 1.3 percent or 65 cents at $51.52 per barrel.
These losses followed the fall on the previous day of more than 1 percent.
According to a report by the American Petroleum Institute on Tuesday, the drops on oil prices were due to the unexpectedly big increases in U.S. fuel inventories.
Jeffrey Halley of futures brokerage OANDA in Singapore said that “The API delivered a Goliath crude inventory number... the second highest on record. The reaction was predictable as the herd, already nervous from the previous day's price action, turned en masse and ran off the cliff”
In the week prior to February 3, oil inventories increased by 14.2 million barrels to 503.6 million barrel, far away from the expectations of analysts of an increase of 2.5 million barrels.
In contrast to the expectations of around a 1.1 million barrel increase, gasoline stocks went up by 2.9 barrels.
There were other hints of market weakness outside of the U.S.
The oil demand of China in 2016 has come to its slowest pace in the last three years.
The implied oil demand growth of China went down to 2.5 percent in 2016, down from 2015’s 3.1 percent and 2014’s 3.8 percent due to a sudden fall in deasel consumption and as gasoline usage eased from double-digit growth.
The slowing happened as the economy expanded by 6.7 percent in 2016, its slowest pace in under three decades.