Oil tumbles close to 12-year lows
US crude oil prices were down as much as 4 percent on Thursday, approaching 12-year lows hit last month, weighed down by brimming US crude inventories and a Goldman Sachs forecast that prices would remain low and volatile until the second half of the year.
US oil prices fell for a sixth straight day after market intelligence firm Genscape reported the Cushing, Oklahoma delivery hub for futures saw a build of almost 425,000 barrels in the week to Feb. 9.
On Wednesday, US government data showed Cushing inventories hit all-time highs just shy of 65 million barrels during the week ended Feb. 5.
US crude fell $1.10, or 4.3 percent, to $26.35 per barrel by 1626 GMT. Earlier, it fell to within 3 cents of the $26.19 intraday low hit in January, then its weakest price since 2003.
The spread between the first two months on the exchange, widened to as much as $2.65, the largest discount, or “contango,” between the two contracts since November, indicating tight storage space was limiting interest to buy prompt barrels to store and sell at a later date.
“If storage becomes any scarcer, producers will have no choice but to sell it (the front-month) even lower,” said Pete Donovan, broker at New York’s Liquidity Energy.
Brent was down 70 cents, or 2.5 percent, at $30.14 per barrel.
Brent gained briefly after a report cited by sources that some OPEC countries were trying to achieve a consensus among the group and key non-members for an oil production “freeze.”
Despite that, fighting among OPEC members for market share appeared to heighten as Iran offered its crude to Asia at a discount to rival Saudi Arabia.
“There’s a price fight within OPEC for Asian market share, and there are worries that storage capacity is going to be breached,” said Bjarne Schieldrop, chief commodity analyst at SEB in Oslo.
Investment bank Goldman Sachs said in a note to its clients it expected oil prices to fluctuate between $20 a barrel, at the operational stress level, and $40, at the financial stress level, with significant volatility and no trend until the second half.
Oil has fallen almost 75 percent since mid-2014 as competing producers pumped 1-2 million barrels of crude daily exceeding demand, just as China’s economy hit lowest growth in a generation.