[NEW YORK] The oil market tumbled on Thursday after Opec said it produced more oil in December than its limit, despite sharply falling prices, and lowered its global demand outlook for its crude.
US benchmark West Texas Intermediate (WTI) for delivery in February plunged US$2.23, or 4.6 per cent, to US$46.25 a barrel on the New York Mercantile Exchange, almost wiping out Wednesday's rally, considered a rare market breather in oil's dizzying dive since June.
In London trade, Brent North Sea crude for February delivery, the international benchmark futures contract, fell US$1.02 (2.1 per cent) to US$47.67.
"The Opec announcement that December production was up, when people had been hoping it would be falling, was the primary factor," said Michael Lynch of Strategic Energy & Economic Research.
The 12-nation Organization of the Petroleum Exporting Countries, which produces about one third of global supplies, said in a monthly report on Thursday that its production rose to 30.2 million barrels a day in December, above the cartel's 30 million output limit.
In addition, Opec projected that demand for its oil would fall to 28.8 million barrels per day (mbpd), from 29.1 million in 2014.
The broadly downbeat Opec report said the global demand for crude will rise slightly this year, to 92.3 mbpd, but that the increase would essentially be absorbed by a 1.28 mbpd rise in production by non-Opec countries, leaving a persistent oversupply of at least 1.0 mbpd in 2015.
The oil market has been notably volatile since WTI on Tuesday hit its lowest close in six years at US$45.89 a barrel.
With prices down almost 60 per cent since June amid oversupply and weakening global economic growth, traders are speculating about when the market will bottom out and begin to climb again.
"I think we've reached a bottom, at US$45, and the fair value should be higher. People want to go higher, but they wait for a better sentiment" about economic conditions, said Carl Larry of Frost & Sullivan.
Tim Evans of Citi Futures noted the trading action came as the February Brent contract expired on Thursday and ahead of the February WTI contract expiration on Tuesday, "suggesting a significant book squaring element in today's dealings."