By Alison Sider and Neanda Salvaterra

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 $1.58, or 3.39%, to $45.09 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, fell $1.55, or 3.22%, to $46.59 a barrel.

The U.S. Energy Information Administration said crude-oil stockpiles rose by 14.4 million barrels in the week ended Oct. 28 -- the largest weekly increase in 34 years of data collected by the EIA. Analysts polled by The Wall Street Journal expected a more modest increase of 1 million barrels.

The report broke a string of weekly draws from U.S. crude supplies that had helped bolster the case that supply and demand were coming into balance.

"You could easily make the argument it's the most bearish report of all time. There's nothing to support the market," said Bob Yawger, director of the futures division of Mizuho Securities USA. "All the barrels you were wondering what ever happened to them came roaring back in one report."

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 ofphysical availability. " he said.

Gasoline prices were falling on Wednesday morning, down 1.65 cents, or 1.11%, to $1.4676 a gallon. U.S. gas futures had surged a day earlier 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.

Diesel futures fell 3.98 cents, or 2.62%, to $1.4771 a gallon.

Jenny W. Hsu contributed to this article

Write to Alison Sider at and Neanda Salvaterra at

(END) Dow Jones Newswires

November 02, 2016 11:32 ET (15:32 GMT)

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