Oil prices fell to two-week lows on Thursday as they extended big losses from the previous session amid a rout in global stock markets, with oil also taking a hit from an industry report showing U.S. crude inventories rose more than expected.
Supply worries also eased as Hurricane Michael likely spared oil assets from significant damage as it smashed into Florida, even as it caused at least one death, injuries and widespread destruction.
Brent crude futures were down $1.22, or 1.5 percent, at $81.87 a barrel by 0237 GMT. They earlier touched their lowest since Sept. 28 at $81.61, after closing 2.2 percent lower on Wednesday.
U.S. West Texas Intermediate (WTI) crude futures were down by $1, or 1.4 percent, at $72.17, having also fallen to their lowest since Sept. 28. They dropped 2.4 percent in the previous session.
Stocks on major world markets slid to a three-month low on Wednesday, with the benchmark S&P500 stock index falling more than 3 percent, its biggest one-day decline since February.
Technology shares tumbled on fears of slowing demand and concerns about U.S.-China tensions. Japan’s Nikkei 225 was down nearly 4 percent on Thursday.
“Ugly, very very ugly,” Greg McKenna an independent market strategist based near Sydney said in a morning note, referring to declines in global markets including oil.
U.S. crude stockpiles rose more than expected last week, while gasoline inventories increased and distillate stocks drew, industry group the American Petroleum Institute said on Wednesday.
Crude inventories climbed by 9.7 million barrels in the week to Oct. 5 to 410.7 million, compared with analyst expectations for an increase of 2.6 million barrels.
Crude stocks at the Cushing, Oklahoma, delivery hub rose by 2.2 million barrels, API said.
The U.S. Energy Information Administration (EIA) is due to release official government inventory data Thursday at 11 a.m. EDT.
In the U.S. Gulf of Mexico, producers have cut daily oil production by roughly 42 percent due to the storm, the Bureau of Safety and Environmental Enforcement said. The cuts represent 718,877 barrels per day of oil production.
While production has been cut because of the hurricane, “down time is expected to be brief and Gulf of Mexico output now accounts for a comparatively small portion of total U.S. production,” Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.
U.S. oil output is expected to rise 1.39 million bpd to a record 10.74 million bpd, the EIA said in its monthly forecast on Wednesday.