West Texas Intermediate oil futures extended losses on Wednesday, after data showed that gasoline supplies in the U.S. rose sharply last week, underlining concerns over a slowing demand for oil products.
Crude oil for delivery in February on the New York Mercantile Exchange dropped $1.31, or 3.64%, to trade at $34.66 a barrel as of 15:35 GMT, or 10:35AM ET. Prices were at around $35.14 prior to the release of the inventory data
Nymex prices fell to $34.48 earlier in the session, the lowest since December 21, when prices hit a six-year trough of $34.29. On Tuesday, prices slumped 79 cents, or 2.15%.
The U.S. Energy Information Administration said in its weekly report that crude oil inventories decreased by 5.1 million barrels in the week ended January 1. The American Petroleum Institute late Tuesday reported a supply fall of 5.6 million barrels.
Supplies at Cushing, Oklahoma, the key delivery point for Nymex crude, rose by 917,000 barrels last week, above forecasts for a gain of 790,000 barrels.
Total U.S. crude oil inventories stood at 482.3 million barrels as of last week, remaining near levels not seen for this time of year in at least the last 80 years.
Gasoline inventories increased by 10.6 million barrels, compared to expectations for a gain of 2.3 million barrels, while distillate stockpiles rose by 6.3 million barrels.
Elsewhere, on the ICE Futures Exchange in London, Brent oil for February delivery dipped $1.60, or 4.38%, to trade at $34.82 a barrel, after sinking to $34.56, a level not seen since July 2004.
A day earlier, London-traded Brent futures lost 80 cents, or 2.15%, as ongoing concerns over a global supply glut outweighed heightened geopolitical tension between Saudi Arabia and Iran.
Meanwhile, Brent’s premium to the West Texas Intermediate crude contract stood at 16 cents, compared to a gap of 45 cents by close of trade on Tuesday.
Global crude production is outpacing demand following a boom in U.S. shale oil and after a decision by the Organization of the Petroleum Exporting Countries last year not to cut production in order to defend market share.
Most market analysts expect a global glut to worsen this year due to soaring production in Saudi Arabia and Russia.
Oversupply issue will be exacerbated further once Iran returns to the global oil market early next year after western-imposed sanctions are lifted. Analysts say the country could quickly ramp up production by around 500,000 barrels, adding to the glut of oil that has sent prices tumbling.