Oil market slides as US crude reserves increase
World oil prices fell heavily on Wednesday, with New York crude sliding below $49, as swelling US inventories added to the global supply glut.
US benchmark West Texas Intermediate (WTI) for March delivery tumbled $1.22 to $48.80 a barrel compared with Tuesday's close.
Brent North Sea crude for March dropped $1.70 to $54.73 a barrel in late afternoon London deals.
"The latest inventories data has reminded investors that the supply glut is here to stay for the time being," said analyst Fawad Razaqzada at trading site Forex.com.
The US government's Department of Energy (DoE) reported that commercial crude reserves rose 4.9 million barrels in the week ending February 6.
Stockpiles were "at the highest level for this time of year in at least the last 80 years", the DoE added in a statement.
Market expectations had been for a smaller gain of 3.6 million barrels, according to analysts polled by Bloomberg News.
"The 4.9-million-barrel increase in weekly oil inventories was not only more than expected but was also significantly higher than the build of 1.6 million barrels that the American Petroleum Institute (API) reported," Razaqzada told AFP.
"Consequently, WTI prices have taken another leg lower."
Rising stockpiles indicate weaker demand in the world's biggest economy and top oil-consuming nation, and therefore tend to depress price levels.
"Crude oil prices extended declines following the announcement with WTI front month futures plunging ... below $49 per barrel," said Sucden analyst Myrto Sokou.
"The downside momentum continues in the oil market as high crude oil inventories verify the slowdown in the oil demand."
The market was also pulled lower by the strong greenback, which makes US-priced crude more expensive for buyers using weaker currencies and therefore tends to dent demand.
Oil prices have been under pressure for months, plunging about 60 percent to just over $40 a barrel between June and the end of January, dragged down by a strong dollar and abundant global supplies.
They have recovered some of their lost ground in recent weeks as the number of drilling rigs falls and energy firms begin to cut investment.
In earlier Asian trading hours on Wednesday, oil prices had rebounded following sharp losses the previous day.
Nicholas Teo, market analyst at CMC Markets in Singapore, said the downbeat market outlook from the International Energy Agency had pushed both contracts down between three and five percent on Tuesday.
The IEA report points to a "persistent global supply glut" for crude, Teo said.
The agency said in its five-year forecast that prices will recover slightly from current levels by 2020 but remain considerably below the $100-plus per barrel seen in June.
© 2015 AFP