Oil prices slump 1 pct amid global market rout

Brent futures fell $2.02 a barrel, or 3.1 per cent, to $62.79 a barrel, its lowest settlement since December 13.

West Texas Intermediate for March delivery traded at $61.70 on the New York Mercantile Exchange, down 9 cents at 8.58am in Tokyo. Following the publication of the report, oil fell by 3.5%, with Brent trading around $65 per barrel and WTI near $61.30.

US and Brent crude futures have slid more than 9 percent from this year's peak in late January. "The market is going to try to determine if the crude draw offsets the distillate build heading into tomorrow's EIA report", said Phil Flynn, analyst at Price Futures Group.

Crude oil has also been under pressure from a stronger USA dollar, which is on track for its biggest weekly rise in more than a year.

The report also showed that USA crude oil production, driven by shale extraction, hit 10.25 million barrels per day, the highest level since the early 1970s and close to the output of top producers Russian Federation and Saudi Arabia.

At 10.25 million bpd, US output is now higher than the previous 10.044 million bpd record from back in 1970, topping Saudi Arabia and within reach of Russia's.

Financial markets sank on Monday after a sharp rise in US bond yields raised concern over a possible increase in inflation and potentially higher interest rates.

China's crude oil and other liquids production dropped the most among non-OPEC nations in 2016, and the EIA expects production to have booked the second-biggest such drop previous year.

Speaking on CNBC this week, he said the supply dynamics were against the market, fearing a fall of WTI to the mid-fifties.

An alternative scenario is where bears have the day, which may see the price drop to the $60 level.

The deal, which commits OPEC and 10 non-OPEC producers led by Russian Federation to cut 1.8 million b/d in supplies through the end of 2018, is aimed at reducing the global inventory overhang.

A cargo of USA condensate has reached Abu Dhabi in the latest sign how much the oil market has changed in the last few years. The reserves in the United States also reported an increase of 1.9 million barrels to 420.25 million barrels for the week to February 2nd. US crude hit a low of $61.62, the lowest level since January 8.

The US continues to be the biggest adversary to the Organisation of Petroleum Exporting Countries' (Opec) efforts to alleviate a global oversupply.

"In other words, the IEA says the oil market will once again be oversupplied largely because of U.S. shale", says Nick Cunningham on OilPrice.com. It exports around 2 million b/d of that crude, from its total production capacity of just over 3 million b/d.

U.S. crude inventories rose 1.9 million barrels last week, compared with analysts' expectations for an increase of 3.2 million barrels, the U.S. Energy Information Administration's (EIA) data showed on Wednesday.

While China has continued to boost its oil imports in recent years, it has also lessened its dependence on OPEC's crude oil.

  • Zachary Reyes