US oil slides to 6-1/2 year low under US$42 as stocks build

A driver refuelling his car with petrol.
A driver refuelling his car with petrol. PHOTO: BLOOMBERG

NEW YORK (Reuters) - US oil prices tumbled more than 3 percent to a 6-1/2-year low under US$42 a barrel overnight as data showing a big rise in key US stockpiles intensified worries over a growing global glut.

A rise in the US dollar, after news of higher US retail sales in July and strengthening employment data, added to the weight on oil.

Oil has fallen by nearly a third since late June, a decline that continued this week after a spate of refinery outages sapped demand for crude. The largest of those refineries - BP PLC's 413,500-barrel per day (bpd) facility in Whiting, Indiana, also the biggest in the US Midwest - has been forced to shut two-thirds of its capacity for repairs to a leak that could last a month or more.

Losses deepened on Thursday after market intelligence firm Genscape reported that stockpiles at the Cushing, Oklahoma delivery point for US crude futures rose more than 1.3 million barrels in the week to Aug. 11, adding to concern that the Whiting outage was pushing up the surplus in crude. If confirmed, the Cushing build would be the biggest since March.

US crude settled down US$1.07 at US$42.23 a barrel, after setting a session bottom at US$41.91, its lowest since March 2009 when the financial crisis was wreaking havoc on oil prices.

The market could see a cascade of sell orders from now on, driving prices even lower, as more technical levels are broken, some analysts said.

Global crude benchmark Brent settled down 44 cents, or almost 1 per cent, at US$49.22, ahead of Friday's expiry of its front-month contract.

Sentiment in oil has been so weak that prices failed to rally even after Wednesday's data from the U.S. Energy Information Administration (EIA) showing a 1.7 million-barrel drop in crude stockpiles last week.

The EIA added to concern about the growing supply glut in oil on Thursday, reminding the market that Iran could boost output by 100,000 bpd this year with an easing of nuclear-related sanctions on Tehran's exports.