Oil prices dropped sharply Wednesday as weekly inventory data revealed a much larger-than-expected increase in crude-oil stockpiles.

U.S. crude futures fell $1.42, or 3%, to $45.25 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, fell $1.41, or 2.9%, to $46.73 a barrel.

The U.S. Energy Information Administration said crude-oil stockpiles rose by 14.4 million barrels in the week ended Oct. 28, while analysts polled by The Wall Street Journal expected a more modest increase of 1 million barrels.

Analysts cite strong imports and low refinery utilization as reasons for the increase.

On Tuesday, U.S. gas futures surged after an explosion and fire at a pipeline, owned by Colonial Pipeline Co., which delivers about one-third of the gasoline used on the East Coast. But gasoline prices but were already falling again on Wednesday morning. Gasoline futures were down 1.65 cents, or 1.11%, to $1.4676 a gallon. Diesel futures fell 3.98 cents, or 2.62%, to $1.4771 a gallon.

Continued output growth from the Organization of the Petroleum Exporting Countries is also weighing on prices, making the prospect of a production cut by the cartel look more remote, said John Kilduff, founding partner of Again Capital.

In September, OPEC leaders met and agreed to curtail the group's production, possibly by 200,000 to 700,000 barrels a day. The goal was to pump up prices by removing some unwanted barrels from the market.

The move nudged crude prices up initially, but with more countries asking to be exempt from the cut, the market fears even if an agreement is ratified at the Nov. 30 meeting in Vienna, the deal would be weak and overall production would still rise.

Recently, Iraq has been lobbying to get an exemption from the deal because of disruptions from Islamic State insurgency.

OPEC members Iran, Nigeria and Libya have already secured exemptions from the agreement because they have faced petroleum-output disruptions.

International oil prices been falling for three straight sessions, largely weighed by dimming prospects that major oil producers will reach a deal to cut production by month-end as originally planned.

"Prices continue to retrace lower and have wiped most of the OPEC premium," said Olivier Jakob an analyst from the Switzerland-based consultancy Petromatrix.

"[The oil cartel] has been talking about cutting production but production has been rising the crude oil markets are still under pressure from a lot of physical availability. " he said.

Jenny W. Hsu contributed to this article

Write to Neanda Salvaterra at neanda.salvaterra@wsj.com and Alison Sider at alison.sider@wsj.com

(END) Dow Jones Newswires

November 02, 2016 11:05 ET (15:05 GMT)

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