Oil prices tumbled more than 7 percent Wednesday as US inventories swelled with surplus crude and traders started to doubt whether OPEC would cut production further.
Benchmark crude for April delivery fell $3.38 to settle at $42.33 a barrel on the New York Mercantile Exchange.
The Energy Information Administration said crude supplies in the US climbed unexpectedly by 700,000 barrels for the week ended March 6. Analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., expected a drop of 1 million barrels.
Tom Kloza, publisher and chief oil analyst at Oil Price Information Service, said the most disturbing part of the report was that national demand for distillate fuel oil dropped by 6.1 percent. Distillate fuel includes diesel fuel used by trucking companies, miners and manufacturers.
"That's an ugly number," Kloza said. "You're not seeing commercial goods moved around the country like a year ago. And we were in a recession a year ago."
Meanwhile, investors are coming to believe that OPEC may not cut production when it meets Sunday in Vienna. The Organization of Petroleum Exporting Countries has already announced output quota reductions of 4.2 million barrels a day, and some analysts had expected the 12-member group would slash another 500,000 barrels per day.