Oil prices plunged close to USD 33 a barrel today as crude extended losses on rising US energy stockpiles and China’s weakening currency.
At 0230 GMT, US benchmark West Texas Intermediate (WTI) for February delivery was down 60 cents at USD 33.37.
Its close of USD 33.97 a barrel on the New York Mercantile Exchange yesterday marked the lowest settlement price since December 2008 during the global financial crisis.
In London, Brent crude for February delivery, the European benchmark, was down 62 cents at USD 33.61.
It had closed below USD 35 for the first time in more than 11 years at USD 34.23 a barrel. The last time the price of Brent was so low was in July 2004.
Oil erased earlier gains in Asian hours after the People’s Bank of China today weakened the yuan to the lowest since March 2011, a reminder of the August cut that sparked market turmoil.
“Given that oil moved directly after the fixing, that would indicate Chinese demand is going to be hurt by the weaker currency,” Angus Nicholson, a market analyst at IG Ltd. in Melbourne, told Bloomberg News.
Demand for crude tends to fall when the US dollar is stronger against currencies of purchasing countries. China is the world’s biggest energy consumer.
The US Department of Energy’s weekly report yesterday showed a sharp drop in US commercial crude inventories, by 5.1 million barrels to 482.3 million barrels in the week ending January 1.
“What was unexpected was the overwhelming inventory increase in gasoline and diesel fuel — the extent of the gasoline inventory build was a very big surprise,” said Andy Lipow of Lipow Oil Associates.
“The petroleum product inventory build has led to pressure on crude oil prices because it impacts refining margins and they (refiners) might ultimately cut their demand for crude oil,” Lipow said.
The government data also showed a gain in US crude production, by 17,000 barrels a day to 9.22 million barrels a day, the fourth straight week of increases, and a rise in stockpiles at the Cushing oil hub in Oklahoma.