Crude Oil Plummets Below $45 After Huge Inventory Buildup

(RTTNews) - U.S. crude oil plunged to end below the $45-mark on Wednesday, after an official weekly oil report from the Energy Information Administration showed crude oil stockpiles in the U.S. to have surged more than expected last week, with inventories at an 80-year high.

Earlier today, a weekly report from the U.S. Energy Information Administration showed U.S. crude oil inventories to have jumped 8.9 million barrels in the week ended January 23, while analysts expected an increase of 3.5 million barrels. As a result, U.S. crude oil inventories surged to 406.7 million barrels end last week.

Gasoline stocks dropped by 2.6 million barrels last week, while analysts anticipated an increase of 0.8 million barrels. Inventories of distillate, including heating fuel, dropped 3.9 million barrels with analysts expecting a decline of 0.6 million barrels.

The American Petroleum Institute late Tuesday said crude oil supplies in the U.S. rose 13 million barrels last week.

Meanwhile, the Federal Reserve on Wednesday repeated its pledge to remain "patient" on raising interest rates amid unusually low inflation that could derail the U.S. economic recovery.

The Federal Reserve at the conclusion of its two-day meet Wednesday afternoon, said, "Based on its current assessment, the Committee judges that it can be patient in beginning to normalize the stance of monetary policy." The statement suggests the Fed is unlikely to raise interest rates until at least June, but probably later.

A number of factors have driven oil prices lower, with OPEC and non-OPEC nations continuing to pump millions of barrels amid slumping demand from Europe and Asia. OPEC producers, namely Saudi Arabia, are pushing ahead with its no compromise stand on cutting production even as crude prices continue to fall dramatically, hoping to cripple competitors and diminish the appeal of renewables.

With the falling crude prices, U.S. stocks also continued to drop amid speculation over the probable exit of Greece from the euro region.

Crude oil for March delivery was down 78 cents at $45.47 a barrel in electronic dealing on the New York Mercantile Exchange. Prices slipped near $44 to a 6-year low earlier in the month.

Barclays has lowered its outlook for crude oil prices to average $42 a barrel in 2015.

"Fundamentals are set to weaken in the first half of the year, dragging prices lower than previously forecast. We assume that OPEC will maintain its position, non-OPEC supply growth will stay firmly in positive territory, and oil consumption will be slow to respond to lower prices," the analysts said in the report.

Light Sweet Crude Oil futures for March delivery, the most actively traded contract, plunged $1.78 or 3.9 percent, to settle at $44.45 a barrel on the New York Mercantile Exchange Wednesday.

Crude prices for March delivery scaled a high of $45.83 a barrel intraday and a low of $44.08.

On Monday, crude oil snapped a three-day loss to end higher at $46.23, or $1.08 or 2.4 percent, after the Organization of the Petroleum Exporting Countries indicated prices may have bottomed with hopes that Saudi Arabia may step in to balance crude prices.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 94.33 on Wednesday, up from its previous close of 94.08 late Tuesday in North American trade. The dollar scaled a high of 94.46 intraday and a low of 93.97.

The euro trended lower against the dollar at $1.1333 on Wednesday, as compared to its previous close of $1.1382 late Tuesday in North American trade. The euro scaled a high of $1.1384 intraday and a low of $1.1308.

On the economic front, China's consumer sentiment decreased marginally in January, a survey by MNI and Westpac showed Wednesday. The Westpac-MNI consumer sentiment index edged down to 112.1 in January from 112.5 in December.

Germany's consumer confidence improved strongly to a 13-year high at the start of the year, as a collapse in energy prices boosted disposable income and raised room for more spending, survey data from the GfK showed Wednesday. The forward-looking consumer confidence index rose more-than-expected to 9.3 in February from 9.0 in January. This was the highest since November 2001, when the score was at 9.6. The February reading was expected to rise marginally to 9.1.

Germany's import prices declined at a faster-than-expected pace in December, data from the statistical office Destatis showed Wednesday. The import price index fell 3.7 percent year-on-year in December, faster than November's 2.1 percent decline. Economists had forecast a 3.4 percent decrease for the month.

The German government also lifted its growth projections for 2015, citing robust consumer spending. The economy ministry expects the economy to expand 1.5 percent this year, up from the prior estimate of 1.3 percent. Gross domestic product was up 1.5 percent in 2014.

France's consumer confidence remained stable in January, defying expectations for a rise, data from statistical office INSEE showed Wednesday. The consumer confidence index came in at 90 in January, the same as in December. This was less than the 91 score expected by economists. Unemployment hit a record high in December, data from the Labour Ministry showed Tuesday. The number of unemployed people rose 0.2 percent or by 8,100 over the previous month to 3,496,400 in December.