Oil prices fell about 4 percent on Wednesday, with U.S. crude hitting 6-1/2 year lows and threatening to break below $40, after a huge unexpected stockpile build in the United States reinforced concerns about a growing global oil glut.
U.S. crude inventories rose by 2.6 million barrels last week to 456.21 million, the government's Energy Information Administration said.
The figures stunned energy market analysts on Wall Street, as well as traders and investors who had been expecting a stockpile drawdown despite the peak U.S. summer driving season nearing its end and refinery problems cutting fuel processing capabilities.
As late as Tuesday, the American Petroleum Institute, an industry group, forecast a 2.3 million barrel drawdown for the week to Aug. 14. A Reuters poll of analysts had predicted an 800,000-barrel decline.
"The numbers were a total surprise with crude showing a build when the whole Street was forecasting a draw," Tariq Zahir, managing member at Tyche Capital Advisors in Laurel Hollow in New York, said.
"We feel these numbers are not factored in to the current price of spot crude."
The front-month futures contract in U.S. crude, which expires on Thursday, was down $1.90, or 4.4 percent, at $40.72 a barrel by 1:11 p.m. EDT (1711 GMT). It had tumbled earlier to $40.59, its lowest since March 2009.
"The charts show that if we break below $40, a $35 handle is very possible in the next few sessions," said Fawad Razaqzada, a London-based technical analyst for forex.com, who follows crude.
The front-month in Brent, the global benchmark for oil, was down $1.72, or 3.5 percent, at $47.09 a barrel.
BP's Whiting, Indiana, refinery, the largest in the Midwest, shut down its biggest crude unit unexpectedly at the start of the week covered by the data. Refinery utilization in the U.S. Midwest region fell to 92.2 percent, the biggest weekly drop in eight months.
Gasoline futures fell even more than crude, tumbling 5 percent to a six-month low, despite stockpiles of the fuel falling 2.7 million barrels compared with the 1.6-million barrel drop expected by analysts in the Reuters poll.
Diesel lost 3 percent, hitting six-year lows.
Oil has lost a third of its value since June on signs of creeping U.S. production amid record crude pumping in the Middle East.
"Couple that with the stronger dollar and weakness out of China and it's a recipe for lower prices ahead," said Chris Jarvis, analyst at Caprock Risk Management in Frederick, Maryland.