Oil prices fall on U.S. storage glut, ongoing economic woes

Oil prices slid on Thursday as record U.S. crude inventories at the Cushing delivery point and worries about a global economic slowdown weighed on markets, and Goldman Sachs said prices would remain low and volatile until the second half of the year.

International benchmark Brent crude futures LCOc1 were trading at $ 30.67 per barrel at 0601 GMT, down 17 cents.

U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $ 27.01 per barrel, down 44 cents and within a dollar of the $ 26.19 a barrel intra-day low hit in January that was the lowest since 2003.

Inventories at the Cushing, Oklahoma delivery point for U.S. crude futures rose to an all-time high just shy of 65 million barrels, data from the government’s Energy Information Administration (EIA) showed on Wednesday.

The U.S.-based Schork Report said that seasonally falling crude oil demand towards the end of the winter heating season also weighed on markets.

Analysts said that the recent strength in Brent’s premium over WTI contracts was supported by U.S. slowing demand and brimming storage.

“Brent is holding much stronger than WTI which reflects the current oversupply in the U.S.,” said Singapore-based brokerage Phillip Futures.

The overhang in oil supplies, together with an economic slowdown in China, means that prices will remain low until the second half of the year, Goldman Sachs said in a note to clients.

“The risks of China growth concerns and oil price downside … materialised faster than we anticipated,” the bank said.

“We expect oil prices will continue to fluctuate between $ 20 per barrel (operational stress level) and $ 40 per barrel (financial stress level) with significant volatility and no price trend until 2H2016,” it added.

Chart analysts said that crude prices may be just days away from falling to $ 25 a barrel or below as weakening technicals put more pressure on the market.

Matthew Sferro, technical analyst at New York’s Informa Global Markets, said if WTI fell further it would likely test the support level at $ 25.04 per barrel established in April 2003.

Oil prices have fallen almost 75 percent since mid-2014 as producers pump 1-2 million barrels of crude every day in excess of demand, just as China’s economy grows at its lowest rate in a generation.

Trading activity in Asia remained low due to China’s New Year holiday which lasts all week and as Japan is also on a public holiday.

(Editing by Subhranshu Sahu and Christian Schmollinger)

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