US benchmark West Texas Intermediate fell $1.82 to $40.80.
Citigroup said WTI could fall to $32 a barrel, levels not seen since the throes of the financial crisis, pressured by excess supplies.
Ongoing refinery outages in California and strong gasoline demand in the US, however, have elevated gasoline prices in the last 2 months, despite decreasing crude oil prices.
“We see U.S. stocks rising to a potential new record high in the fourth quarter, unless of course production starts falling fast”, Amrita Sen, chief oil analyst at consultants Energy Aspects Ltd.in London, said in a report.
But output from the Organization of the Petroleum Exporting Countries was at roughly 31.5 million barrels a day during July, he said. Is it worth it to produce so much crude well over 3 million barrels per day globally in order to maintain a market share and by doing so depleting the sources of oil?
“The sell-off definitely put pressure on oil prices, but the big capital infusion from the government might be supportive – you pump that money into the system and that might increase oil demand”, said Phil Flynn, an oil market analyst at Price Futures Group in Chicago.
But recent oil declines are tied to fears that China is slipping into a serious recession.
US crude oil prices could average around $49 per barrel in 2015 and $54 per barrel in 2016, according to the EIA’s (U.S. Energy Information Administration) estimates.
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.
Light Sweet Crude Oil futures for October delivery, the most actively traded contract, plummeted USD1.85 or 4.3%, to settle at USD41.27 a barrel on the New York Mercantile Exchange Wednesday.
In the latest sign of Saudi Arabia’s attempt to secure market share, Egypt said on Thursday it agreed a $1.4 billion three-month oil products deal with state-owned Saudi Aramco to begin in September. The September contract expired Thursday after rising 34 cents to $41.14.
With oil supply still outpacing demand, prices may not move up in the short-term.
The Indian basket, made up of 73 percent “sour” grade crude from Oman and Dubai and the balance by “sweet” grade Brent, fell to its lowest of $43.36 in January, provoking the Reserve Bank of India to make the first of its interest rate cuts this year after nearly two years. U.S. crude output still remains near its highest level in more than 40 years.