Big Reserves Send Oil Prices Tumbling

Oil futures fell sharply on Wednesday as the United States Energy Department's Energy Information Administration released reports of oil and gas reserves that shattered the expectations of analysts and investors, report Bloomberg and other financial news services.

Oil prices fell by nearly $2 a barrel in the wake of the stunning reports.

The U.S. Energy Information Administration announced that crude stocks rose by 6.9 million barrels last week. Analysts had expected that number to be a paltry 100,000 barrels. Gasoline stocks were up 1.8 million barrels; analysts had expected that number to be closer to just 1 million.

"The completely unexpected build in crude stocks is the surprise of the day. And it is very bearish," Tim Evans, analyst at Citigroup Global Markets, told Reuters.


"This is a very bearish report because we were not looking for this kind of build in crude-oil stocks. Rising imports and falling refinery utilization are responsible for the increase. The drop in refinery utilization isn't a problem as long as product inventories keep growing," Evans told Bloomberg.


However, there is tumultuous news out of Nigeria, the eighth leading oil producer in the world and a leading exporter to the United States. Labor unions in that nation rejected a government offer to cut a price hike on automobile fuel in half and launched a general strike Wednesday. The unions are threatening to target the oil industry with their strikes, with the objective being to cut down oil exports that count for 90 percent of the government's income.

"Between now and 12 midnight, we will withdraw our members from all DPR locations, including oil export terminals," Mohammed Saidu, branch chairman of the PENGASSAN union in the DPR, was quoted as saying by Reuters.


"It will take a couple of days before a better assessment can be made on its impact on crude oil flows," Olivier Jakob, an analyst at Petromatrix Gmbh in Switzerland, told the Associated Press.