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NYMEX Crude $ 33.97 DN $2.0000
NY Harbor ULSD $1.0807 DN $0.0446
NYMEX Gasoline $1.1618 DN $0.0949

NEWS
Crude-oil futures dropped for a third straight session on Wednesday, with prices for Brent and West Texas Intermediate crude hitting their worst settlement levels since 2004 on the back of growing concerns over the world’s glut of crude supplies.

The latest U.S. data revealed a big weekly drop in crude supplies, but also showed that gasoline inventories jumped and oil production climbed. The weakening Chinese economy and escalating tensions in the Middle East add to the risk of a further increase in the global glut of crude.

Brent for February delivery dropped $2.19, or 6%, to $34.23 barrel on the ICE Futures exchange. Prices for the most-active contracts settled at their lowest level since June 2004, according to FactSet data. February West Texas Intermediate crude gave up $2, or 5.6%, to $33.97 a barrel on the New York Mercantile Exchange, for the lowest settlement since February 2004, according to Fact Set. Early Wednesday, the U.S. Energy Information Administration said crude inventories dropped by 5.1 million barrels for the week ended Jan. 1. The American Petroleum Institute on Tuesday reported a 5.6 million-barrel decline, according to sources. Analysts polled by Platts expected supplies to be up 2.75 million barrels, while Citi Futures analysts looked for a decline of between two million and three million barrels. “As you look deeper into the numbers, the major builds in the products—gasoline and distillates—“these builds are going to overwhelm the seasonal draw in crude oil,” said John Macaluso, an analyst at Tyche Capital Advisors. He explained that the market tends to go through year-end “destocking” of crude for tax purposes, so crude supplies often fall in December. And that so-called destocking resulted in more product output. Gasoline supplies rose by 10.6 million barrels, while distillate stockpiles climbed 6.3 million barrels last week, according to the EIA.

U.S. oil production, meanwhile, totaled 9.22 million barrels a day, up 17,000 barrels on the week, the EIA said. “Any fear premium in conflicts between Saudi Arabia and Iran, or the overnightNorth Korea fiasco, have been swallowed up by continued oversupply data,” said Macaluso. “Furthermore the Saudi-Iran conflict is likely to enhance the price war headed by Saudi Arabia.” The conflict between the two states “is a political issue that will impact the oil market in the short term,” top Iranian official Mehdi Asali said on Wednesday, according to Dow Jones Newswires. However, he labeled the persistent global oil glut as the “biggest threat” to the market.

The health of China’s economy was also on energy investors’ minds. A Caixin purchasing managers index on Wednesday showed China’s service sector expanded at the slowest rate in 17 months, cementing fears that the economy is losing momentum and that energy demand could decline.