At one time, the price dropped as low as $40.46 a barrel on the New York Mercantile, following the release of data that showed a huge unexpected stockpile build in the United States. The volume of all futures traded was about 26% above the 100-day average.
As crude oil prices change, prices of wholesale, and ultimately retail, gasoline adjust to reflect crude oil costs.
In China, a manufacturing gauge fell to the lowest level in more than six years, signaling the economy may need further policy support to stem a deepening slowdown.
“US stockpiles unexpectedly expanded when the market was looking at a contraction, which heightened the global oversupply concerns”, said Bernard Aw, a market strategist at IG Markets.
Brent crude, the global oil benchmark, fell 0.9% to $46.20 a barrel on London’s ICE Futures exchange. However, in the summer of 2015, the oil story also includes issues related to demand, particularly connected to concerns about China, where the government seems to be taking aggressive measures like weakening its currency to rekindle a slowing economy.
According to Energy Information Administration (EIA), crude inventories were up 2.6million barrels to 456.21 million in the week ended 14 August as against the projections made by analysts that there would be drop of 777,000 barrels in the inventories.
In late 1985, oil prices slumped to $10 a barrel from around $30 over five months as OPEC raised output to regain market share following an increase in non-OPEC production.
The string of losses for WTI crude has sparked increasing comparisons with the major bear market in 1986, said Tim Evans, an energy analyst at Citi Futures, in a note. “Until supply and demand come into balance there’s going to be downward pressure”, said James Williams of WTRG Economics.
But output from the Organization of the Petroleum Exporting Countries was at roughly 31.5 million barrels a day during July, he said.
“But the fact remains the world is oversupplied with record crude production from Saudi Arabia and Iraq and is anticipating the return of Iranian crude”, he said.
Refinery inputs to distillation units slipped 1 per cent to 17.1 million barrels a day.
“The next few weeks would be the right time to start buying into the dips”, Francisco Blanch, Bank of America’s head of commodities research in New York, said in an interview with Bloomberg TV.