London: Brent crude dropped to a fresh 16-month low below USD 99 a barrel on Wednesday with rising supplies and weak demand helping extend losses into a fifth session.
Brent has fallen by more than 14 percent since hitting a year high above USD 115 a barrel in June, with fast-rising U.S. output and the return of exports from Libya creating a market that looks increasingly over supplied.
While a larger-than-expected drop in weekly U.S. crude stocks lent some support on Wednesday, more pressure came from a firmer U.S. dollar which makes commodities priced in the greenback more expensive for holders of other currencies.
The dollar index stood near a 14-month high, with some investors betting the U.S. Federal Reserve would raise interest rates earlier than previously thought.
Brent crude for October delivery hit a low of USD 98.80 hit, the lowest intraday price since May 1, 2013. It was trading down 9 cents at USD 99.07 a barrel at 0914 GMT.
U.S. crude was up 5 cents at USD 92.80 a barrel with its discount to Brent narrowing to just over $6 a barrel, the lowest since mid-August.
"I wonder how much further Brent could fall after falling below the psychologically important USD 100," said Ken Hasegawa, a commodity sales manager at Newedge Japan.
"America has entered seasonal (refinery) maintenance and demand is weak."
Oil prices on both sides of the Atlantic have dropped over the past three months, dragged down by soaring U.S. shale oil production which has replaced many imports from West Africa, Europe and other regions, leading to a supply glut in the Atlantic Basin and Asia.
The U.S. Energy Information Administration (EIA) said Tuesday that U.S. output in August hit its highest level since 1986.
The United States is the world`s largest oil consumer and as recently as 2010 was reliant on imports for almost 50 percent of its consumption. That is expected to fall to just over 20 percent next year, the EIA said.
Traders are increasingly moving oil into storage in a bid to sell it forward for later delivery at a higher price, with spot prices falling to an increasing discount due to increasing supplies, a market structure known as contango.
Chinese trader Unipec has booked the world`s largest ship, a 3.2 million barrel capacity supertanker, to store Russian oil until prices recover, trading sources said this week, with analysts estimating about 50 million barrels of oil have already moved into floating storage.
U.S. CRUDE STOCKS
Despite stronger U.S. production, data from industry group the American Petroleum Institute showed a 1.9 million barrel decline in U.S. crude stocks last week, versus analysts` expectations for a drop of 1.1 million as refiners produced more gasoline and diesel ahead of seasonal maintenance work.
Inventories at Cushing, Oklahoma, the closely-watched delivery point of the U.S crude oil contract, fell 261,000 barrels, the API said, while gasoline and distillate stocks rose.
Weekly government stockpile data from the EIA will be released later in the day at 1430 GMT.
Investors are also eyeing the Gulf Arab oil ministers` annual meeting on Thursday in Kuwait which could include discussions about oil prices now that Brent has dropped below the USD 100 a barrel level.
The Organization of the Petroleum Exporting Countries (OPEC) releases its monthly market outlook later on Wednesday.
Ukraine also remained in focus.
The United States was putting the finishing touches on possible new sanctions on Russia`s defence, energy and financial sectors over its intervention in Ukraine, the U.S. State Department said on Tuesday.
European Union Trade Commissioner Karel De Gucht called on the United States to export oil and natural gas to Europe under a transatlantic trade deal, in part to reduce the region`s dependence on Russian energy resources.
