Oil briefly touched a 12-year-low of $26.05 and investors fear it still has further to fall.
Oil prices crashed through $27 (U.S.) a barrel Thursday as investors fled the risky asset over fears that it still has further to fall.
Benchmark West Texas Intermediate dropped $1.24 to close at $26.21 (U.S.) a barrel. It briefly touched a 12-year-low of $26.05 (U.S.) before bouncing slightly after a Wall Street Journal report suggesting OPEC could agree to production cuts.
“Of course, they were just rumours and the fundamental political tension within OPEC perseveres,” Scotiabank economists wrote in a note.
The drop came a day after data showed stockpiles at the biggest U.S. oil hub rose to a record 64.7 million barrels last week, inching closer to capacity of 73 million barrels.
Crude prices have fallen by about 30 per cent since the year began amid worries that the removal of U.S. sanctions against Iran could flood the market with new exports from the Middle East, while existing inventories are already well above average.
The plunge from $100 (U.S.) oil began in mid-2014 when OPEC began to boost production to guard its share of the market as the U.S. increased its output.
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