Oil prices tanked further in Asian trade today as a crude supply glut overshadowed the news that China’s key manufacturing sector picked up slightly, analysts said.
US benchmark West Texas Intermediate (WTI) tumbled 30 cents to $80.22 a barrel in late-morning trade and Brent crude eased 34 cents to $84.37.
Both contracts, already at multi-year lows, fell sharply on Wednesday after the US Department of Energy (DoE) reported that American oil inventories climbed by 7.1 million barrels in the week to October 17, more than double the market expectations.
US crude oil stockpiles
The US stockpiles surge added to worries over a market already awash with crude oil and further adding downward pressure on prices.
Members of the OPEC cartel have signalled that they will keep the output levels stable, with some preferring to cut prices in order to gain share in a competitive market.
Daniel Ang, investment analyst with Phillip Futures in Singapore, said the surge in US inventories came in earlier than the normal cyclical pattern and “clearly displays the global oversupply that we are experiencing’’.
He said US crude oil inventories were currently higher than the levels in 2012 and 2013.
“We believe the US crude inventory is currently at an alarming level and, at this rate, it is likely that (the) US could possibly start cutting US crude oil imports,” he said in a note.
Today’s decline came despite a rise in British banking giant HSBC’s preliminary purchasing managers index of manufacturing activity (PMI) for China, the world’s top energy consumer.
HSBC said its PMI reading hit 50.4 in October, up from 50.2 in September, indicating that the activity is picking up and soothing some concerns about the world’s number two economy.
Anything above 50 indicates growth and a figure below points to contraction.
The result comes days after Beijing released data showing the economy grew at its slowest pace since the start of 2009.