Oil crashes after four-day rally; U.S. inventory renews glut worry
By Barani Krishnan
NEW YORK (Reuters) - Oil prices crashed on Wednesday, with U.S. crude losing 9 percent in one of its biggest daily routs ever, as record high oil inventories in the United States cut short a four-day rally.
The abrupt turn, coming after a 19 percent price gain between Thursday and Tuesday, also raised questions on whether the market had found a bottom to the selloff that began last summer and is now in its eighth month.
Selling began early in the day after a rebound in the dollar hurt demand for oil from those holding currencies such as the euro. The slide accelerated midmorning, after the U.S. government reported a huge weekly build in crude supplies, and showed its full force in the final hour. [USD/] [EIA/S]
Benchmark Brent oil LCOc1 fell below the key $55 a barrel mark, after soaring to a one-month high of $59 just a day ago. U.S. crude CLc1 broke below $48, after Tuesday's peak above $54.
"Hereon, I've no illusions that we'll be going further and further down until something fundamentally changes," said Tariq Zahir, portfolio manager at Tyche Capital Advisors, an investment fund in Laurel Hollow in New York.
"I'm sticking to my shorts and selling into any strength I see until we get rid of 1.5 million to 2 million barrels of oil a day from this market," he said.
U.S. crude stocks jumped by 6.3 million barrels last week to 413.06 million, their highest since records began in 1982, the government-run Energy Information Administration reported on Wednesday. Traders and investors had expected a build of just about 3.5 million barrels for the week ended Jan. 30. [EIA/S]
"The truth of the matter is that after this newest record high in crude inventories, it's probably going to be outside forces like the dollar, stock market and economic data which will determine if oil prices continue to go up or pull back," said Phil Flynn, analyst at the Price Futures Group in Chicago. Continued...