Oil dived Friday to two-month lows after the International Energy Agency said commercial crude stockpiles in developed nations had hit a record high 3.0 billion barrels.
The news, contained in the IEA’s latest report, renewed concerns over a global supply glut that had sparked the recent oil price collapse.
In Friday afternoon deals, London Brent crude struck $43.60 per barrel and New York crude touched $40.45, levels last seen in late August.
“The market is being overwhelmed by rising supply,” said Michael Corcelli, chief investment officer of hedge fund Alexander Alternative Capital LLC in Miami.
“We could test the six-year lows reached in August at any moment. We will either break through or put in a bottom,” he told Bloomberg News.
At about 1600 GMT, U.S. benchmark West Texas Intermediate for delivery in December was down $1.17 at $40.58 a barrel.
Brent North Sea crude for December slid 41 cents to stand at $43.65 a barrel in London late afternoon deals compared with Thursday’s close.
Crude futures had already plunged Thursday as the weekly U.S. stockpiles report showed soaring oil inventories, fueling a global supply glut.
“U.S crude futures extended their losses ... pulled down on the supply side by a relentless climb in oil stockpiles, which has triggered a 10-percent drop in prices since the start of November,” added ETX Capital analyst Dominic Stewart.
“Demand for oil has particularly slid in two of Asia’s biggest economies, China and Japan, which has led to concerns for investors about slowing (global) demand.”
The market was also pulled lower this week by the strong dollar, which makes commodities priced in the U.S. unit more expensive for buyers with weaker currencies. That weighs on demand.
The U.S. Department of Energy reported Thursday that commercial crude inventories in the world’s top oil consumer grew by 4.2 million barrels last week.
That was far higher than analyst expectations of an increase of 1.3 million barrels, reinforcing projections that a supply glut will persist well into next year. The report also showed U.S. crude oil production continued to ramp higher.
Global oil demand growth has not been fast enough to soak up the excess in supplies and analysts say a rebalancing of the supply-demand situation is needed for a sustained uptick in prices.
Meanwhile on Friday, the IEA predicted world oil demand would grow by 1.2 million barrels per day in 2016, after a five-year high of 1.8 mbd this year, as cold weather and rekindled economic growth in some countries boost consumption.
The IEA also hinted at continuing pressure on prices.
Oil is more than 60 percent down since mid 2014, with the market plagued by oversupply owing in particular to booming U.S. shale output.
Members of the Organization of the Petroleum Exporting Countries (OPEC) have also kept production high in an aggressive bid to retain market share and pressure high-cost U.S. shale producers.
The 12-member OPEC cartel will meet on December 4 in Vienna for their next output meeting.
“The OPEC meeting scheduled for December may shed some light on how the organization plans to tackle the global glut, but it remains unlikely that a cut may be implemented this year,” noted FXTM research analyst Lukman Otunuga.
OPEC’s output target level stands at 30 million barrels per day, but the cartel’s members are pumping above the collective quota.