A surprise boost in US oil inventories last week, threatened to worsen a global supply glut, pushing oil prices to the lowest level in six and a half years, with the energy commodity crashing by nearly 5 per cent in the domestic market on Wednesday.
US crude oil stockpiles climbed by 2.6 million barrels to 456.2 million barrels in the week ended August 14, the EIA said. Analysts had estimated a drawdown of 800,000 barrels last week while total storage remains at the highest level in at least 80 years, a sign that oversupplies remain in place. Stockpiles at Cushing, the biggest US oil storage hub, rose by 326,000 barrels last week.
Oil also felt the pain from a worsening China slowdown which threatened to curb demand for the fuel in the world's second biggest oil consumer. China's recent stock and currency market turmoil has rattled investor confidence and fanned fears that the rout may spread to other parts of the economy, restricting fuel demand.
Meanwhile, oil found little support from the FOMC minutes which underlined concerns over tepid inflation and sought more signs of strength in economic growth and labour markets coupled with confidence that prices were rising towards the required goal, to justify a maiden interest rate rise in nine years.
Oil may witness a rebound today as the sharp tumble in prices on Wednesday spurs some buying at lower levels.
At the MCX, Crude oil futures, for the August 2015 contract, closed at Rs 2,650 per barrel, down by 4.64 per cent, after opening at Rs 2,775, against the previous close price of Rs 2,779. It touched an intraday low of Rs 2,637.