U.S. crude tumbled below $27 a barrel in Asia on Thursday as the oversaturated market struggled to cope with high inventories in the United States and an increased output from the Organization of the Petroleum Exporting Countries.
The decline came despite the weekly U.S. Department of Energy report showing U.S. oil stocks fell about 800,000 barrels for the week ending Feb. 5, with traders seeing inventories still at high levels.
U.S. benchmark West Texas Intermediate (WTI) for March delivery was down 40 cents, or 1.46 percent, to $27.05 at around 0600 GMT after sinking to as low as $26.85 earlier in the session. Brent crude for April fell 14 cents, or 0.45 percent, to $30.70.
On Jan. 20, WTI dipped to a depth of $26.19 a barrel before closing at $26.55 that same day, the lowest since May 2003. “Given the falls that we have seen over the last three trading sessions, it is a little surprise to see such aggressive selling interest during our time zone,” said Michael McCarthy, chief market analyst at CMC Markets in Australia. “Given the short positions and the traders involved here, it is not impossible that this is an attempt to push it through the low and induce some technical selling,” he said by telephone from Sydney.
“Swollen crude inventories in the U.S. are putting increased downward pressure on the price of WTI, increasing its differential to the international benchmark Brent,” BMI Research said in a note.
Oil prices briefly rallied after the U.S. commercial crude inventories report was released Wednesday. However, prices soon dropped back as traders took note of higher supplies of gasoline, a rise in stocks at the key Cushing, Oklahoma trading hub and a scant drop in oil production.
Analysts said sentiment was also marred by a report from the Organization of the Petroleum Exporting Countries that showed the cartel’s production rose by about 130,000 barrels a day in January. The OPEC report followed a bearish outlook released Tuesday by the International Energy Agency, which predicted the global oil surplus would be larger than previously expected in the first half of 2016.