NEW YORK - Brent crude ended 2 per cent lower on Wednesday after falling below US$30 (S$43) a barrel for the first time since April 2004 as a growing stocks of oil in the United States stoked market fears about demand.
Both Brent and US crude futures saw highs early in the day of more than US$1 above Tuesday's closing price on upbeat Chinese economic data earlier in the session.
But US government data showing builds in crude, gasoline and diesel supplies augmented fears that demand will stagnate as global markets contend with oversupply.
Concerns about US economic uncertainty also amplified the declines, the Standard and Poors 500 index dipped below 1900 for the first time since early October. [.N]
Brent, which normally trades at a premium to US crude <cl-lco1=r>, flipped into a discount just after 2:00 p.m. EST (1900 GMT), as it tested and broke beneath the US$30 level.
Data showing that crude inventories <usoilc=eci> rose 234,000 barrels last week, much less than expectations, was overshadowed by reported builds of 8.4 million barrels in gasoline <usoilg=eci> and over 6 million in distillates, which includes diesel and heating oil <usoild=eci>. [EIA/S]
"Overall, it's a bearish report. I think today's inventory report is all about products...The long awaited massive decline in crude production is not starting again," said Dominic Chirichella, senior partner at Energy Management Institute in New York.
This was a second week of huge builds in refined fuel with gasoline surging the most since 1993 in the previous week.
"Last week's build was massive, and this week's was much larger than the seasonal norm," said John Saucer, Vice President at Mobius Risk Group in Houston.
The dynamics of supply have shifted as diesel stockpiles have surged past year-ago levels, indicating a products surplus, Saucer added.
Analysts at Morgan Stanley also warned that a rise in demand for crude could be lower than previously expected.
"Any slowing in the rate of demand growth could delay the timing of rebalancing and ultimately a price recovery," they said in a research note.
The potential for the calling of an emergency OPEC meeting also weakened on Wednesday when Iran's oil minister was quoted as saying he had not received any request for such a gathering.
Nigeria's oil minister said on Tuesday that a "couple" of OPEC members had asked for an emergency meeting.