On Wednesday West Texas Intermediate oil futures neared the lowest level in six years, amid expectations supply data will show U.S. crude inventories rose to the highest level on record last week.
On the New York Mercantile Exchange, crude oil for delivery in April slumped 88 cents, or 2.02%, to trade at $42.58 a barrel during European morning hours. Meanwhile, the May Nymex contract was down 54 cents, or 1.19%, at $44.65 a barrel.
Yesterday, the front-month contract fell to $42.41, a level not seen since March 2009, before ending at $43.46, down 42 cents, or 0.96%, as ongoing concerns over a glut in supplies drove down prices.
The government report due on Wednesday is expected to show that U.S. crude oil stockpiles rose by 3.8 million barrels last week, while gasoline stockpiles are forecast to dip by 0.9 million barrels.
After markets closed Tuesday, the American Petroleum Institute, an industry group, said that U.S. crude inventories increased by 10.5 million barrels in the week ended March 13, compared to expectations for a gain of 3.8 million. The data indicated that gasoline stockpiles fell by 583,000 barrels, while distillate stocks decreased by 252,000 barrels.
Total U.S. crude oil inventories stood at 448.9 million barrels as of last week, the most in at least 80 years, indicating that cheap prices have yet to affect output.
The number of rigs drilling for oil in the U.S. fell by 56 last week to 866, the 14th straight week of declines, says industry research group Baker Hughes (NYSE:BHI). The amount of working U.S. oil rigs is 46% lower than an all-time high of 1,609 hit in October.
Market players have been paying close attention to the shrinking rig count in recent months for signs it will eventually reduce the glut of crude flowing into the market.
Traders say there are concerns over diminishing spare capacity to store excess oil in the U.S. and China which also weighed on the sentiment.
Elsewhere, on the ICE Futures Exchange in London, Brent oil for May delivery declined 35 cents, or 0.64%, to trade at $53.17 a barrel. London-traded Brent prices touched $52.57 on Tuesday, the lowest level since February 2, before closing at $53.51, down 43 cents, or 0.8%. The spread between the Brent and the WTI crude contracts stood at $8.52 a barrel, compared to $8.32 by close of trade on Tuesday.
Developments surrounding talks between Iran and world powers over Tehran's nuclear program are also closely watched by market participants. According to a US official, there are some signs of
progress in discussions with Tehran over its disputed nuclear industry
in exchange for a gradual end to sanctions on the Islamic Republic.
Agreement between Iran and world powers could result in a flood of Iranian crude returning to the market which is already oversupplied.
