Oil prices tumble to fresh lows

Oil prices hit fresh lows on Thursday, approaching the key $40 (36 euros) a barrel mark after a surprise increase in US inventories added to concerns of a supply glut.

US benchmark West Texas Intermediate (WTI) dipped 21 cents to $40.59 in afternoon trade after falling sharply in New York to its lowest level since March 2009.

At the same time, Brent crude dropped 28 cents to $46.88 a barrel.

The US Department of Energy on Wednesday said oil stockpiles rose 2.6 million barrels in the week ending August 14, and reported a 300,000-barrel rise at the closely watched Cushing, Oklahoma trading hub.

The surprise jump in inventories at a time when they normally fall added to concerns of a global surplus, particularly as signs emerge that demand is faltering in China.

US banking giant Citigroup said WTI could fall to $32 a barrel, a level not seen since the throes of the financial crisis, pressured by excess supplies.

Weak global economy

Fears that growth in China, the world's second-largest economy and top energy importer, is slowing over the long term are affecting risk assets around the world.

The commodities sector was among the hardest-hit by fear of a slowdown in Chinese demand.

Falls in oil and other commodity prices hit many resource-exporting emerging economies hard, and they have already suffered shocks from capital outflows as the prospect of higher US interest rates looms larger.

Many emerging market currencies are also under pressure, with their economic woes compounded by local political problems in some cases.

Minutes from the last month's meeting of US Federal Reserve's Open Market Committee showed officials in broad agreement that the US economy was nearing the point where interest rates should move higher.

But they also noted lagging inflation and a weak global economy posed too big a risk to commit to "lift-off," leading some investors to question the likelihood of a rate hike in September.

sri/hg (AFP, Reuters)