Prices fell as much as 1.2% to $105.29 after the Energy Department said supplies rose 4.16 million barrels to 344.9m last week.
US Fed chairman Ben S Bernanke, in prepared testimony for Congress, gave no signal that the central bank is considering more measures to spur the economy and called the inflation outlook is “subdued.”
“The big increase in inventories surprised people,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “Everything fell after Bernanke’s comments. It suggests to people that hopes for big demand recovery are going to be delayed.”
Crude oil for April delivery fell $1.26, or 1.2%, to $105.29 a barrel on the New York Mercantile Exchange yesterday. Oil traded at $106.60 a barrel before release of the inventory report yesterday.
Brent oil for April settlement dropped 47 cents, or 0.4%, to $121.08 a barrel on the London-based ICE Futures Europe exchange. The inventory gain was almost four times the 1.1m barrel gain that was the median estimate of analysts in a Bloomberg survey.
Gasoline, Distillates Prices touched a nine-month high of $109.95 a barrel in February as the US and Europe ramped up sanctions against Iran over its nuclear program.
“The inventory increase is pretty bearish and it indicated weak demand in the US,” said David McAlvany, chief executive officer of McAlvany Financial Group in Durango, Colorado. “Prices should have gone lower without external factors such as Iran.”
Gasoline inventories fell 1.6m barrels to 229.9m last week, the Energy Department said. Stockpiles were forecast to slip 425,000 barrels. Gasoline demand dropped 3.1% to 8.36m barrels a day.
Distillate supplies, which include heating oil and diesel, fell 2.07m barrels to 141.4m. Stockpiles were forecast to fall 750,000 barrels.
Oil gained earlier as the US economy expanded more than forecast in the fourth quarter. Gross domestic product climbed at a revised 3% annual rate, the most since the second quarter of 2010, the Commerce Department reported.