LONDON: Oil extended losses to fall under $56 per barrel, reversing a four session rally after US crude inventories jumped to a record high, shifting the global glut back in to focus.
Brent was $2.10 lower at $55.81 per barrel, having traded as high as $59 per barrel well above lows for the year close to $45 a barrel hit two weeks ago.
Oil’s near 20 per cent surge since Friday had raised speculation crude’s seven month rout may be at an end, but the sharp sell-off indicated prices may not yet have found a floor, with the market still well supplied.
The US Energy Information Administration said US crude stocks rose by 6.3 million barrels last week to 413.06 million barrels, the highest level since records began in 1982.
Since prices fell by 60 per cent between June and January, traders have wrestled with whether the dramatic price collapse would be enough to slow fast-growing US shale output or whether oil still had further to fall.
Crude stocks at Cushing, Oklahoma, delivery point of the US crude oil contract rose by 2.5 million barrels, while gasoline and distillate stocks also jumped.
While a sharp drop in the number of US oil rigs and a wave of budget cuts by major energy companies boosted speculation production would fall faster than expected, analysts predict the market will still be oversupplied for the first half of the year.
Other factors are also influencing the outlook, with the dollar steadying after its worst day in more than a year. The US unit rose against a basket of currencies by 0.2 per cent, making dollar traded commodities more expensive.
