Crude sank the most in more than four months as oil executives turned gloomier on the prospect of a recovery this year.
Futures fell 6.7 percent to the lowest since
May 2003. Royal Dutch Shell Plc said Wednesday it expects fourth-quarter profit to drop at least 42 percent. Markets could "drown in oversupply," sending prices even lower as oil demand growth slows and Iran boosts exports, the International Energy Agency said Tuesday. A "lower-for-even-longer" scenario is forcing companies' budget planners to trim spending even further.
"At this point things are ugly, and there's no reason to buy into this market," said Stephen Schork, president of the Schork Group Inc. in Villanova, Penn.
West Texas Intermediate for February delivery, which expired Wednesday, fell $1.91 to settle at $26.55 a barrel on the New York Mercantile Exchange. It was the lowest close since May 7, 2003.
The more-active March future slid $1.22 to $28.35. Total volume traded was 50 percent higher than the 100-day average at 2:34 p.m.
Brent for March settlement slipped 88 cents, or 3.1 percent, to $27.88 a barrel on the London-based ICE Futures Europe exchange. The contract closed at a 47-cent discount to WTI for the same month.
As crude prices fell another 28 percent this year, oil and gas producers have begun revisiting their budgets to adjust to worsening market conditions.
Canada's Husky Energy Inc. and Whitecap Resources Inc. this week joined Vermilion Energy Inc. in making deeper cuts to their 2016 spending plans, together trimming their budgets by about $648 million.
More producers are expected to follow, Benny Wong, an analyst at Morgan Stanley in New York, said Wednesday in a phone interview.
Losses accelerated as the Dow Jones Industrial Average sank more than 200 points and the Standard & Poor's 500 Oil & Gas Exploration and Production Index lost 1 percent. Devon Energy Corp. dropped about 8 percent, the biggest decline on the S&P 500.
Oil inventories in the U.S. probably increased by 2.5 million barrels last week to 485.1 million barrels, according to a Bloomberg survey before a report from the Energy Information Administration Thursday.
They reached 490.9 million in April, the highest since 1930, according to weekly and monthly data from the EIA. Supplies at Cushing, Okla., the delivery point for WTI and the biggest U.S. oil-storage hub, increased to a record 64 million barrels on Jan. 8.
"Concerns about excess supply continue to weigh on the market," said Gene McGillian, a senior analyst at Tradition Energy in Stamford, Conn. "We began last year with a multi month string of huge inventory gains. It looks like we're going to do the same this year, with the difference being that we're already close to 80-year highs."
The EIA is also projected to report that U.S. stockpiles of gasoline and distillate fuel, a category that includes diesel and heating oil, rose in the week ended Jan. 15.
Gasoline for February delivery dropped 0.8 percent to $1.0177 a gallon. Diesel for February delivery decreased 4.7 percent to 86.57 cents, the lowest settlement since April 2004.
Prices might drop further as world powers lift sanctions on Iran and production in the Islamic Republic ramps up, said UBS Group AG Chairman Axel Weber in an interview.
"I don't see a bottoming-out of oil prices — and a re-spiking — anytime soon," Weber told Bloomberg Television's Francine Lacqua and Hans Nichols at the World Economic Forum in Davos, Switzerland.