FTSE sinks to lowest level since January

U.S. September crude was down $1.85 at $40.77 a barrel at 11:41 a.m. EDT (1541 GMT), having fallen to $40.60, the lowest front-month price since March 2009. It said markets will be tracking the eurozone, U.S., and Chinese flash PMI data on Friday very closely.

“The level of US crude stockpiles actually increased last week, and by 2.6 million barrels, no less”. Saudi Arabia exported 7.365 million barrels per day (bpd) in June, up from 6.935 million bpd in May, figures published by the Joint Organizations Data Initiative (JODI) showed.

Western Canadian crude, a heavier type of crude that is more hard to refine, is now trading in the $20 range, provoking analysts to speculate on the commodity trading as low as as a barrel in the not too distant future.

Futures earlier fell to nearly Dollars 40 a barrel on Thursday, their lowest since the global financial crisis of 2009, as supplies rose in North America and the Middle East, filling stockpiles to record levels.

The market was pummelled after the US government’s Department of Energy reported that American crude inventories rose by 2.6 million barrels in the week to August 14. The European benchmark crude ended the session at a premium of US$5.89 to WTI.

We have yet to come out of the summer driving season which will hamper refinery output rates, ultimately increasing U.S inventories.

“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 said. The draw was preceded by a 4.4 million decline for the week ending July 31, as crude production across the U.S. continues to level.

“As we go into the next couple of months, crude oil demand is going to decline, which worries the market”, said Andy Lipow, head of Houston consultancy Lipow Oil Associates.

Even so, the administration said gasoline prices are “elevated” right now because of strong demand in the U.S. and overseas and oil refinery outages in California. He added that, although he could see oil prices rebounding in the coming weeks, he thought they would remain low into next year.

“The report is bearish, with the focus squarely on crude oil and the large increase in overall inventories, due mostly to a surge in imports”, said John Kilduff, partner at Again Capital LLC in New York.