Oil jumps as Qatar ditched, London attacks hurt sterling

United States stockpiles grew by 3.3 million barrels in the week ending June 2, while the market had expected a 3.5 million barrels decline, the Energy Information Administration said.

The report also revealed a shock increase in diesel and petrol inventories after the EIA estimated U.S. demand fell by 1 million barrels a day last week.

Brent crude prices were at $48.32 US per barrel mid-morning Wednesday, down $1.80, or 3.6%. Following the release, WTI futures dropped more than 4% to trade at $46.12 per barrel. Though last week's daily crude production ebbed from the previous week, when it reached the highest level since August 2015, it remained above 9.3 million barrels.

Crude oil imports meanwhile rose by 356,000 barrels per day versus the prior week, the EIA said, with refineries running at 94.1% of their operating capacity.

"Despite strong compliance overall so far, OPEC's efforts have not borne much fruit, as far as oil prices are concerned", said Eklavya Gupte, Senior Editor, Europe and Africa Oil News, S&P Global Platts.

Oil has struggled to stay above $50 a barrel amid speculation that rising US output will counter supply curbs by the Organization of Petroleum Exporting Countries and its partners, including non-OPEC member Russian Federation.

Investors fear that should geopolitical tensions in the Middle East escalate, Qatar may abandon its production quota previously agreed under the OPEC deal, which could derail the global pact to extend production curbs until March.

US West Texas Intermediate (WTI) crude futures had dropped 32 cents, or 0.7 percent, to US$47.08 per barrel.

The Energy Information Administration (EIA) increased its USA output estimates with an increase in production to 9.3 million bpd expected for 2017 while the EIA also projected that 2017 output could reach 10 million bpd. USA oil exports have surged the past six months from 442,000 barrels a day in December.

Focus is likely to shift to USA inventories ahead of government data Wednesday.

Prices initially surged on Monday before settling lower as the spat was seen having a limited impact on oil supply.

While Opec works to bring the market back into balance with its agreement to cut output by 1.8m barrels per day (bpd), production in the United States has been rocketing. Crude supplies shrank by 4.62 million barrels, the API reported.

According to Vivek Dhar, mining and energy analyst at the Commonwealth Bank, this saw concerns surrounding oversupply in the U.S. market intensify, leading to the enormous selloff in WTI crude futures.

  • Zachary Reyes