America is starting to wallow in unsold oil.
Prices slid into a bear market for the US benchmark crude, West Texas Intermediate (WTI) style oil after US oil stocks hit their highest level for almost two years.
At the same time estimated US daily production hit a new all-time high of 12.4 million barrels a day – but the extra oil has nowhere to go except into stockpiles.
That’s an increase of more than 1.6 million barrels a day in the past 12 months.
That rise came from shale increases from the Permian Basin in West Texas and New Mexico.
And that jump in production has come despite a near 10% slide in the number of rigs being used to drill for oil in the US since the end of 2018. US oil rig numbers are down from 877 in December to 800 in late May.
There were more than 1600 active oil rigs at the peak in late 2014 as global oil prices were sliding.
That US shale producers can now get more oil per rig four and a half years later tells us a lot about the enormous efficiencies and lower costs wrung out of the system by producers large and small in that time.
In fact, the Energy Information Administration (EIA) reported the strongest build in crude oil and oil product stocks since 1990.
Weekly data from the EIA showed US commercial crude oil inventories surged by 6.8 million in a week to May 31, to 483.26 million barrels, their highest levels since July 2017.
That saw Brent and WTI prices hit their lowest levels since January, at $US59.45 and $US50.60 a barrel respectively on Wednesday trading.
Economists saw slowing activity in major economies is starting to hit energy demand.