Traders are girding for further weakness with the end of summer driving season. Prices consolidated after a six-week rout driven by global oversupply and concerns about falling demand in Asian economies and the United States.US government data on crude stockpiles is due at 10:30 a.m. EST (1430 GMT) on Wednesday.
The EIA also lowered its near-term outlook for crude oil prices based on the latest inventory numbers.
US banking giant Citigroup said WTI could fall to $32 a barrel, a level not seen since the throes of the financial crisis, pressured by excess supplies. Shutting down production is costly and can be permanent, which makes “high-end costs a tentative floor which can easily be breached”, the bank said.
West Texas Intermediate oil futures bounced off six-and-half year lows Thursday, getting a lift from weakness in the U.S. dollar as the September contracts expired.
Energy companies invested heavily in drilling over the past few years, when the price of oil was generally over $100 a barrel.
Demand growth is not keeping pace with supply, especially with the slowdown in China, the world’s top energy consuming nation and its second-biggest economy.
Marathon Oil Corp suffered a 6.5 per cent drop in afternoon trading. They rallied earlier in the year but are now nearly a third below their last peak in May.
Nymex reformulated gasoline blendstock – the benchmark gasoline contract – fell 1.8 per cent to $US1.53 a gallon. All reached three- or four-year lows.
Prior to 2015, the EIA had never reported inventory levels that had breached the 400 million level.
There was a slight increase in inventories as a US refinery closed for repairs last week.
Gasoline stocks fell 2.7 million barrels, compared with analysts’ expectations in a Reuters poll for a 1.6 million-barrel drop.
“This renewed decline in oil prices has largely been driven by a combination of concerns about demand, notably from China, and continued strong growth in supply”, said Pugh. “While this is a clear sign that low prices will lead to less production, it was not enough to convince people yesterday”, Commerzbank senior oil analyst Carsten Fritsch said.