U.S. crude oil fell to its lowest in almost six-and-a-half years on Friday as huge stockpiles and refinery shutdowns added to concerns about global oversupply and slowing economies in Asia.
Oil had already tumbled more than 3 percent on Thursday, driven by a report that stocks at Cushing, Oklahoma, the delivery point for U.S. crude futures, rose more than 1.3 million barrels in the week to Aug. 11.
U.S. crude CLc1 was down 30 cents at $41.93 a barrel by 0845 GMT. The contract earlier hit an intraday low of $41.35, its lowest since March 4, 2009. Brent crude LCOc1 traded at $49.00, down 22 cents and some way off its 2015-low of $45.19 reached in January.
U.S. crude is much weaker than the North Sea benchmark, partly due to a spate of refinery outages that has sapped U.S. demand. The largest of those refineries – BP PLC’s (BP.L) 413,500 barrels per day (bpd) facility in Whiting, Indiana, also the biggest in the U.S. Midwest – has been forced to shut two-thirds of its capacity for repairs to a leak that could last a month or more.
Robin Bieber, director and technical analyst at London brokerage PVM Oil Associates, said the U.S. crude oil contract, also know as West Texas Intermediate or WTI, had become somewhat dislocated from Brent:
“The contracts are not all on the same technical page and this causes a lack of clarity,” Bieber said. “WTI could plunge but the rest hold steady.”
Goldman Sachs said that a weaker Chinese yuan was putting downward pressure on all commodity markets.
“The (yuan) devaluation has been important for commodity markets and we believe it signals that global macro conditions have changed,” Goldman Sachs said in a note to clients.
“Even China has now joined the negative feedback loop that is running between commodity deflation, growth and deleveraging trends … We believe the net commodity market effects are bearish.”
Analysts said that prices could fall further.
“The lowest crude prices in six years might not be enough to put the brakes on the U.S. supply growth. U.S. shale players are actively cutting cost and some players are profitable at less than $30 per barrel,” ANZ Bank said.
On the demand side, China’s crude oil imports have so far remained strong as authorities take advantage of low prices to build up strategic reserves and consumers kept spending despite the slowing economy.