Oil prices slid on Thursday as record US crude inventories at the Cushing delivery point and worries about a global economic slowdown weighed on markets, and Goldman Sachs said prices would remain low and volatile until the second half of the year.
US West Texas Intermediate (WTI) crude futures were at $27.05 per barrel at 10.30am UAE time, down 40 cents and within a dollar of the $26.19 a barrel intra-day low hit in January that was the lowest since 2003.
International benchmark Brent crude futures, on the other hand, were trading at $30.71 per barrel, down 13 cents.
Analysts said that the recent strength in Brent’s premium over WTI contracts was supported by US slowing demand and brimming storage.
Inventories at the Cushing, Oklahoma delivery point for US crude futures rose to an all-time high just shy of 65 million barrels, data from the government’s Energy Information Administration (EIA) showed on Wednesday.
“Brent is holding much stronger than WTI which reflects the current oversupply in the US,” said Singapore-based brokerage Phillip Futures.
The US-based Schork Report said that seasonally falling crude oil demand towards the end of the winter heating season also weighed on markets.
The overhang in oil supplies, together with an economic slowdown in China, means that prices will remain low until the second half of the year, Goldman Sachs said in a note to clients.
“The risks of China growth concerns and oil price downside ... materialised faster than we anticipated,” the bank said.
“We expect oil prices will continue to fluctuate between $20 per barrel (operational stress level) and $40 per barrel (financial stress level) with significant volatility and no price trend until 2H2016,” it added.
Chart analysts said that crude prices may be just days away from falling to $25 a barrel or below as weakening technicals put more pressure on the market.
Matthew Sferro, technical analyst at New York's Informa Global Markets, said if WTI fell further it would likely test the support level at $25.04 per barrel established in April 2003.
Oil prices have fallen almost 75 per cent since mid-2014 as producers pump 1-2 million barrels of crude every day in excess of demand, just as China’s economy grows at its lowest rate in a generation.
Trading activity in Asia remained low due to China’s New Year holiday, which lasts all week and as Japan is also on a public holiday.