Employees spray water to cool down oil tanks at a PetroChina oil storage facility in Suijing, Sichuan Province, China
Employees spray water to cool down oil tanks at a PetroChina oil storage facility in Suijing, Sichuan Province, China REUTERS/Stringer China

Oil prices slid to near four-month lows on Wednesday (22 March), with Brent briefly joining the West Texas Intermediate (WTI) below $50 per barrel levels before a marginal recovery, as data indicated that US crude inventories rose well above market forecasts.

In a scheduled release, the US Energy Information Administration (EIA) said the country's crude oil inventories rose by almost 5 million barrels to 533.1 million last week, well above aggregated market forecasts in the range of 2.7-2.9 million barrels.

The data, released late afternoon, accelerated intraday declines in Europe after oil benchmarks endured a torrid morning in Asia.

At 5:02pm BST, the Brent front month futures contract was down 1.04% or 53 cents to $50.43 per barrel, while WTI was 0.89% or 43 cents lower at $47.81 per barrel, as the market continues to give more weight to the downside drag of higher US crude production versus upside pull of Opec cuts.

City analysts say the market is fast losing patience, as Opec cuts instituted on 30 November 2016 have not had as significant an impact on global stockpile reduction as some had expected, non-Opec compliance with the cuts remains questionable, yet relatively higher prices in the wake of the cuts have ended up propping US production.

Ole Hansen, head of commodity strategy at Saxo Bank, said: "Opec has used up most of its arsenal of verbal weapons to support the market. One hundred percent compliance by all is the only tool they have left and on that account they are struggling."

FXTM research analyst Lukman Otunuga said oil benchmarks will remain vulnerable to downside shocks as growing concerns over the excessive oversupply in the global markets weighed heavily on sentiment.

"The bias towards oil is turning increasingly bearish and the fading optimism over the effectiveness of Opec's supply cut deal has enticed bears to install repeated rounds of selling. Although most remain somewhat optimistic over Opec extending its six-month supply cut agreement beyond June, the resurgence of US shale coupled with concerns of some members not fully respecting the compliance in cutting production could obstruct the deal."

Away from the oil market, precious metals saw mixed intraday fortunes. At 5:26pm GMT, the Comex gold futures contract for April delivery was up 0.25% or $3.10 to $1,249.60 an ounce, while spot gold was trading at $1,249.73 an ounce, up 0.40% or $4.92.

However, Comex silver was down 0.05% or 2 cents to $17.58 an ounce, while spot platinum was 0.77% or $7.48 lower at $962.65 an ounce.