Oil prices in New York sagged to a new six and a half year low Wednesday following data showing an increase in US petroleum stocks.
US benchmark West Texas Intermediate for delivery in September dropped $1.82 to $40.80 a barrel on the New York Mercantile Exchange. The contract fell as low as $40.46 a barrel earlier in the session.
European benchmark Brent oil for October delivery fell $1.65 to $46.81 a barrel in London.
The drop came after a US Department of Energy report showed oil stocks rose 2.6 million barrels in the week ending August 14. The data also showed a 300,000 barrel rise at the closely-watched Cushing, Oklahoma trading hub.
Traders are girding for further weakness with the end of summer driving season.
“As we go into the next couple of months, crude oil demand is going to decline, which worries the market,” said Andy Lipow, head of Houston consultancy Lipow Oil Associates.
Lipow and other analysts expect US oil prices to dip below $40 a barrel.
Bearish factors include the Iran nuclear deal with major powers; slowing demand in China; and continued high output in Saudi Arabia and some other OPEC countries.
“We’re probably likely for some further weakness,” said Fred Lawrence, vice president of economics and international affairs at the Independent Petroleum Association of America.
“I don’t necessarily expect it to go below $40 for a long period of time, but it certainly is poised to do that.”