January 28, 2015 / 3:23 AM / in 3 years

Oil tumbles; U.S. crude prices near six-year low on record stockpiles

NEW YORK (Reuters) - Oil slumped on Wednesday, with U.S. crude prices at near six-year lows, after the government reported record-high inventories in the United States that raised anxieties about the global oil glut that had pressured the market since last summer.

Fuel prices are seen displayed on a fuel pump at PetroChina's solar-powered Yizhuang gas station in Beijing January 9, 2015. REUTERS/Kim Kyung-Hoon

The U.S. Energy Information Administration (EIA) said domestic crude oil stocks rose by almost 9 million barrels last week to reach nearly 407 million, their highest since the government began keeping records in 1982.

A Reuters poll on Tuesday had forecast a build of just above 4 million barrels for the week to Jan. 23. The American Petroleum Institute, an industry group, had estimated a far bigger growth of nearly 13 million barrels.

Oil prices, lifted by a weaker dollar in the previous session, tumbled anew on the stockpile data.

U.S. crude’s front-month contract CLc1 settled down $1.78, or almost 4 percent, at $44.45 a barrel. It sank to as low as $44.08 before the close, marking a bottom since April 2009. Open interest in the front-month remained near record highs for a fifth straight day, according to Reuters data.

Benchmark Brent crude LCOc1 closed down $1.13, or 2.3 percent, at $48.47, after a session low at $48.29.

The spread between the two crude oils CL-LCO1=R was its largest in a month, with Brent fetching a premium of about $4 a barrel due to the weaker fundamentals in U.S. crude.

Traders expected oil prices to come under further pressure in coming days despite the EIA report citing positives like a near 3 million barrel drop in gasoline stocks and almost 4 million barrel decline in diesel and heating oil inventories. [EIA/S]

“The sub-90 percent refinery utilization is causing oil supplies to back up, and the downward pressure on prices should continue,” said John Kilduff, a partner in New York energy hedge fund Again Capital.

“Refined product demand continues to be the sole source of strength for the market, but it is not enough to overcome the tidal wave of crude oil supplies for now.”

Fast-growing U.S. shale output has pushed oil prices almost 60 percent lower since June, with losses accelerating after the Organization of the Petroleum Exporting Countries said it would not cut production in a bid to preserve its market share.

Goldman Sachs analysts said in a Tuesday note that they expected U.S. crude, also known as WTI, to remain near $40 a barrel in the first half of this year.

Additional reporting by Robert Gibbons and Samantha Sunne in New York, David Sheppard and Himanshu Ojha in London, and Florence Tan in Singapore; Editing by David Evans, William Hardy, Lisa Von Ahn, Diane Craft, Chizu Nomiyama

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