Oil tumbles to below $46 after U.S. inventory report disappoints

Click through the gallery above to see how the oil glut affects the wider economy.

U.S. oil prices tumbled below $46 a barrel after a government report showed the nation’s crude inventories didn’t decline as much as traders expected.

In its weekly report, the Energy Information Administration said domestic crude inventories fell by 2.22 million barrels in the week ended July 1. A Bloomberg survey of analysts showed the market expected a draw of 2.5 million barrels, and the American Petroleum Institute had earlier estimated a decline of 6.7 million barrels.

RELATED: Oil headed to biggest drop in 5 months amid glut

Crude stocks have dropped for nearly two months, a sign U.S. oil production is still in decline after a ruinous energy glut crushed prices and forced drillers to cut 100,000 jobs across Texas. WTI for August delivery fell $2.17 to $45.26 a barrel after the EIA report, reversing earlier gains.

One reason traders ignored the decrease in inventories is the growing supply of gasoline: increasingly, the oil glut is turning into a gasoline glut. While oil stocks declined by 2.2 million barrels, the inventory of petroleum products including gasoline rose by 5.6 million barrels of oil equivalent, the report said.

“Just about everything points to lower prices,” Stephen Schork, president of the consulting company Schork Group Inc., told Bloomberg “At this time of year it’s all about gasoline, not crude, and supplies remain close to record highs even though demand is very strong. This is very bearish.”

SEE ALSO: Chris Tomlinson takes measure of oil’s continued slump

The EIA report showed gasoline inventories fell by 122,000 barrels. Oil stocks declined by 82,000 barrels at the oil hub in Cushing, Okla., but on the Gulf Coast, inventories increased by 1.25 million barrels as imports rose by 808,000 barrels a day last week.