Oil near 6-year low, Brent trades at par to U.S. crude

Traders were searching to store the glut of oil, which has knocked down prices 60 percent in the last six months

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Oil prices fell by up 3 percent to near six-year lows on Tuesday, with Brent briefly trading at par to U.S. crude for the first time in three months as some traders moved to take advantage of ample storage space in the United States.

Traders were searching to store the glut of oil, which has knocked down prices 60 percent in the last six months. So far this week, Brent has lost 8 percent and U.S. crude about 6 percent.

Brent was down $1.48 at $45.95 a barrel by 1850 GMT, after falling to $45.19, its lowest since March 2009.

U.S. crude was down 65 cents at $45.42 a barrel, after hitting an April 2009 low of $44.20.

The arbitrage between Brent and U.S. crude traded at parity for the first time since October, with both markets touching $46 a barrel at one point.

Traders said the benchmarks converged as limited storage for Brent forced traders to look for storage in the Cushing, Oklahoma delivery point for U.S. crude.

U.S. onshore storage tanks for crude are barely a third full, showing the highest vacancy rate since the government’s Energy Information Administration began its bi-annual survey of tank farm capacity in 2010.

Some said the convergence was not sustainable because the narrowed arbitrage attracted foreign imports.

Traders have also booked at least 12 tankers to store 25 million barrels of crude at sea in a further sign of a build-up in global stocks, according to shipping sources and fixture data.

At least 11 very large crude carriers (VLCCs) have been reported as booked with storage options, shipping sources and fixture lists show, rising from around five vessels at the end of last week. Each VLCC can hold a maximum of 2 million barrels of oil.

Price differentials for U.K. North Sea Forties crude weakened on Tuesday, pressured by an abundant supply in the Atlantic basin.

The U.S. government said domestic oil production will rise by 200,000 barrels per day in 2016, the slowest rate of growth since 2011, reflecting the long-term impact of plunging prices on drilling.

Traders continued to wonder when price rout would end.

“Despite the magnitude of the selloff, there are no indications anyone knows what the bottom is,” said Gene McGillian, senior analyst at Tradition Energy in Stamford, Connecticut.

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