LONDON: Oil fell more than $2 on Wednesday towards $54 a barrel after US crude stock piles hit record highs.
US commercial crude oil stock piles rose by 4.9 million barrels last week to 417.93 million barrels, their highest since records began in 1982, the government-run Energy Information Administration reported on Wednesday.
Traders and investors had expected a build of about 3.7 million barrels for the week ended Feb. 6. as US crude stocks rose for their fifth consecutive week.
US crude oil inventories at the key Cushing, Oklahoma, storage hub jumped 1.21 million barrels to 42.6 million barrels, the EIA said. Gasoline stocks rose by 2 million to 242.65 million barrels, their highest since 1990, compared with analysts' expectations of a 0.2 million barrel build.
Distillate stocks fell 3.3 million to 131.22 million barrels.
Brent crude futures were down $1.95 at $54.48 by 1545 GMT, having hit a session low of $53.91 after the EIA data release. US crude traded at $48.52, down $1.50.
"The further increase in crude oil inventories only serves to reinforce the oversupply narrative that has predominated sentiment for months," said John Kilduff, partner at Again Capital LLC in New York.
After more than halving since June, oil prices have rallied by over 20 percent in the last four weeks. Kuwaiti Oil Minister Ali al-Omair said on Wednesday crude prices could rise to $60 a barrel by the end of the year. But analysts agreed with International Energy Agency predictions that following the crash, oil prices would stabilise well below the highs of more than $100 a barrel seen in the last three years.
Jefferies Bache analysts said Brent and US crude, known as West Texas Intermediate (WTI), would fall in the short term.
"We still expect fresh WTI lows and an ultimate decline towards the $40 area," they said in a note to traders. "Assuming our $40 WTI target is achieved, a nearby Brent price in the $48 area would be implied."
"All in all, we are maintaining a bearish stance." Adding further pressure on prices, the EIA kept its 2015 and 2016 domestic oil output forecasts virtually unchanged from the previous month. The EIA expects US oil production in 2015 to be 9.3 million barrels per day, slightly lower than the 9.31 million bpd forecast in last month's short-term energy outlook.
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