Barrel of US crude drops below $40

October U.S. crude was down 87 cents or 2.1% at $40.44 per barrel having at one time touched a low of 6 ½ years at $39.86 per barrel during the day. At the same time the global benchmark Brent fell 2.5% down to $45.46 per barrel.

Commercial inventories increased by 2.6 million barrels last week, according an Energy Information Administration report this week, jolting energy analysts. Oil has lost a third of its value since June on signs of creeping US production amid record crude pumping in the Middle East. “Couple that with the stronger dollar and weakness out of China and it’s a recipe for lower prices ahead”, said Chris Jarvis, analyst at Caprock Risk Management in Frederick, Maryland. US supplies too remained stout in spite of stressed viability of its fracking industry, which sparked off oil’s global slide by tanking up the home market with shale oil and gas.

Stocks, oil and emerging market currencies fell on Thursday as fading expectations for an imminent U.S. interest rate hike stoked anxiety about the health of the global economy.

Adding to the downward pressure on oil prices is a steady drumbeat of economic data out of China suggesting that the world’s second-largest economy is slowing.

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Trading on Wall Street ended with a whimper Friday with the two most popularly watched market indices, the Dow Jones industrial average and the S&P 500, surrendering all of the gains they had posted so far this year.

“The market is stuck in a relentless downtrend”, said Robin Bieber, a director at London brokerage PVM Oil Associates.

Investors will be watching the weekly US oil rig count, due on Friday, to see if a slump in crude prices has started to dampen production in the world’s top consumer.

U.S. crude oil, was up 10 cents at $40.90 a barrel by 1340 GMT, after hitting a new 6-1/2-year intraday low of $40.21.

Crude oil prices have by far the biggest effect on retail fuel prices. EIA’s updated projection remains subject to significant uncertainties: the pace and volume at which Iranian oil reenters the market, the strength of oil consumption growth, and the responsiveness of non-OPEC production to low oil prices.

The RAC says petrol prices could again fall close to £1 per litre if the price goes much lower.

The current collapse in oil prices, the second this year, has raised alarm within the Organization of the Petroleum Exporting Countries (OPEC), including some of its core Gulf members. The nation’s stockpiles are nearly 100 million barrels above the five-year seasonal average, weekly government data showed Wednesday.