Investing.com - Oil prices extended this week’s rout to hit levels not seen in more than a decade on Thursday, as mounting concerns over China’s economic outlook added to the view that a global supply glut may stick around for longer than anticipated.
China is the world's second largest oil consumer after the U.S. and has been the engine of strengthening demand.
Market sentiment was hit after the People's Bank of China set its official yuan midpoint rate lower compared with Wednesday's fix. It was the largest daily drop in the midpoint rate since last August, when an unexpected almost 2% devaluation of the currency sparked a broad based selloff in markets.
Adding to risk aversion, trading on China’s stock markets was suspended for the second time this week after a plunge of more than 7% after the open.
Crude oil for delivery in February on the New York Mercantile Exchange sank $1.45, or 4.25%, to trade at $32.54 a barrel as of 09:08 GMT, or 4:08AM ET. It earlier fell to $32.10, a level not seen since December 2003.
On Wednesday, Nymex prices tumbled $2.00, or 5.56%, after data showed that gasoline supplies in the U.S. rose sharply last week, underlining concerns over a slowing demand for oil products.
The U.S. Energy Information Administration said in its weekly report that gasoline inventories increased by 10.6 million barrels, compared to expectations for a gain of 2.3 million barrels, while distillate stockpiles rose by 6.3 million barrels.
The data also showed that crude oil inventories decreased by 5.1 million barrels, but supplies at Cushing, Oklahoma, the key delivery point for Nymex crude, rose by 917,000 barrels.
Total U.S. crude oil inventories stood at 482.3 million barrels as of last week, remaining near levels not seen for this time of year in at least the last 80 years.
Elsewhere, on the ICE Futures Exchange in London, Brent oil for February delivery dropped $1.29, or 3.78%, to trade at $32.94 a barrel, after sinking to $32.16, the lowest since April 2004. A day earlier, London-traded Brent futures lost $2.19, or 6.01%.
Meanwhile, Brent's premium to the West Texas Intermediate crude contract stood at 40 cents, compared to a gap of 26 cents by close of trade on Wednesday.
Global crude production is outpacing demand following a boom in U.S. shale oil and after a decision by the Organization of the Petroleum Exporting Countries last year not to cut production in order to defend market share.
Most market analysts expect a global glut to worsen this year due to soaring production in North America, Saudi Arabia and Russia.
Oversupply issue will be exacerbated further once Iran returns to the global oil market early next year after western-imposed sanctions are lifted. Analysts say the country could quickly ramp up production by around 500,000 barrels, adding to the glut of oil that has sent prices tumbling.