Oil cut its four-day rally short with traders and investors focusing again on the supply glut after the US crude stocks hit record highs.
US crude stocks rose 6.3 million barrels last week to 413.06 million, the highest since the records began in 1982, as reported by the Energy Information Administration. Investors and traders had expected a 3.5 million barrels build for the week closed January 30.
Reuters reported that US crude broke below the $50 per barrel mark, losing about a third of the almost 20% gain it had made from Thursday’s close. It dropped 7% or $3.65 per barrel to $49.40.
Brent crude lost 5% or $1.90 to $55.26 per barrel.
Phil Flynn, analyst at Price Futures Group said, “The truth of the matter is that after this newest record high in crude inventories, it’s probably going to be outside forces like the dollar, stock market and economic data which will determine if oil prices continue to go up or pull back.”
Oil’s $9 surge since Thursday had raised speculation that the rout of seven months of the market might be near the end.
The Wall Street Journal quoted the EIA as having said in a report, “US crude oil inventories are at the highest level for this time of year in at least the last 80 years.”
In the report, Sal Umek, associate at the Energy Management Institute said, “If the market was looking for something to try and extend the four-day rally, it was certainly not here.”
Morgan Stanley analysts said in a report that the producers are going to feel no notable difference between prices of $40 and $60 per barrel after the prices had more than halved from the June peaks of more than $100.
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