Oil prices have plunged close to $33 a barrel, extending losses on Wednesday that saw crude prices fall to an 11-year low. Rising US energy stockpiles and China's weakening currency are being blamed for the slump.
In early trading on Thursday, US benchmark West Texas Intermediate (WTI) for February delivery was down 88 cents, or 2.59 percent, at $33.09 (30.4 euros) - the lowest since touching $32.40 in December 2008 during the global financial crisis.
In London, Brent crude for February delivery, the European benchmark, was down $1.46, or 3.5 percent, at $32.77. It had closed below $35 for the first time in more than 11 years at $34.23 a barrel on Wednesday. The last time the price of Brent was so low was in July 2004.
Oil erased earlier gains in Asian hours after the People's Bank of China on Thursday weakened the yuan to the lowest since March 2011, a reminder of Beijing's currency depreciation in August that sparked market turmoil.
"Given that oil moved directly after the fixing, that would indicate Chinese demand is going to be hurt by the weaker currency," Angus Nicholson, a market analyst at IG Ltd. in Melbourne, told Bloomberg News.
Demand for crude tends to fall when the US dollar is stronger against currencies of purchasing countries. China is the world's biggest energy consumer.
The US Department of Energy's weekly report on Wednesday showed a sharp drop in US commercial crude inventories of 5.1 million barrels to 482.3 million barrels in the week ending January 1.
Andy Lipow of Lipow Oil Associates told the news agency AFP that the overwhelming inventory increase in gasoline and diesel fuel, however was "unexpected and a very big surprise."
"The petroleum product inventory build has led to pressure on crude oil prices because it impacts refining margins and they [refiners] might ultimately cut their demand for crude oil," Lipow said.
The government data also showed a gain in US crude production of 17,000 barrels a day, taking it to 9.22 million barrels a day, the fourth straight week of increases, and a rise in stockpiles at the Cushing oil hub in Oklahoma.
uhe/tk (AFP, dpa, Bloomberg)