By Shadia Nasralla
LONDON Oil prices dropped on Thursday, extending falls from the previous session amid surging U.S. crude inventories as ample supply and weak refinery data weighed on demand.
Brent crude futures, the international benchmark for oil prices, were at $70.40 per barrel at 0857 GMT, down 59 cents from their last close.
U.S. West Texas Intermediate (WTI) crude futures were down by 43 cents at $60.99 per barrel, after falling 2.5% the previous day.
Brent is set for its biggest weekly fall in 12 weeks and WTI in 15 weeks.
U.S. crude oil inventories rose last week, hitting their highest levels since July 2017, the government's Energy Information Administration said on Wednesday.
Industry data had also shown a surge in U.S. crude stockpiles.
Commercial U.S. crude inventories rose by 4.7 million barrels in the week ended May 17, to 476.8 million barrels, the EIA data showed.
"The headlines figures are depressing enough and scratching the surface does not paint a rosier picture either," PVM's Tamas Varga said in a note.
"The prevalent optimism for a tighter global market and higher oil prices will now only be vindicated when U.S. oil inventories start drawing."
Beyond weak refinery demand for feedstock crude oil, the increase also came on the back of planned sales of U.S. strategic petroleum reserves (SPR) into the commercial market.
U.S. crude oil production climbed by 100,000 barrels per day (bpd) to 12.2 million bpd, putting output near its record of 12.3 million bpd reached late last month.
Also bearish is the ongoing trade war between the United States and China, which is clouding economic growth, and with that, oil demand predictions as well.
The U.S. military said it sent two Navy ships through the Taiwan Strait on Wednesday, its latest transit through the sensitive waterway, angering China.
(GRAPHIC: U.S. oil drilling, production & storage levelshttps://tmsnrt.rs/2DxgF8W)
Countering these bearish price factors have been escalating political tensions between the United States and Iran, as well as ongoing supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC).
French bank BNP Paribas (PA:BNPP) said high inventories meant that OPEC would likely keep its voluntary supply cuts in place.
"Supply management is here to stay," the bank said.