NEW YORK – A day after the biggest rally in six years propelled oil into a bull market, prices plunged the most in two months Wednesday as signs of a glut grew.
Crude fell 8.7 percent in New York and 6.5 percent in London after a government report showed the highest U.S. supply in at least three decades. That snapped a 24 percent gain since Jan. 13 for Brent, the international benchmark.
Analysts at Societe Generale SA and UBS Group AG see oil's gains since the middle of January as a brief respite from the plunge that took prices from over $100 a barrel in June to the mid $40s. While companies are idling rigs and curbing spending to slow production growth, it won't be enough to immediately reduce output.
"It's hard to fight with the fundamentals," said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. "Until you really see production starting to be cut, you are not going to see any kind of sustainable rally. Any kind of strength will be sold into."
West Texas Intermediate for March delivery decreased $4.60 to $48.45 a barrel on the New York Mercantile Exchange. It gained 19 percent in the four days to Tuesday, settling at $53.05, the highest close this year. The volume of all futures traded was 69 percent above the 100-day average for the time of day.
Brent for March settlement slipped $3.75, or 6.5 percent, to $54.16 a barrel on the ICE Futures Europe exchange in London. Prices had increased 24 percent on Tuesday from their Jan. 13 close of $46.59, the lowest in almost six years, meeting the common definition of a bull market.
The European benchmark crude traded at a premium of $5.71 to WTI on the ICE.
Oil has retreated more than 50 percent since June as U.S. production surged and the Organization of Petroleum Exporting Countries resisted output cuts.
