The price of US crude oil sank to its lowest point in four and a half years this evening as traders shrugged off a big OPEC output cut to focus on rising US energy reserves.
At one point, US crude plunged as low as $40.20 a barrel - the lowest level since July 2004. Later, London Brent stood at $46.64, down one cent from Tuesday's close. US crude was $2.08 lower at $41.50.
OPEC ministers meeting in Oran, Algeria, approved a record output cut of 2.2 million barrels of oil a day. The group, which pumps 40% of world crude, wants to boost prices that have slumped since hitting record highs above $147 in July.
But the market was affected by news that American crude reserves climbed across the board last week - indicating weaker demand in the world's biggest energy consumer.
The US Department of Energy said crude oil stockpiles climbed by 500,000 barrels in the week ending December 12. That was five times market expectations for a gain of 100,000 barrels. American reserves of crude oil are running about 9% higher than at the same stage last year, according to the DoE. Reserves of petrol rose 1.3 million barrels last week, which was also greater than analysts' forecasts.
The DoE added that distillates inventories, which include diesel and heating fuel, increased by 2.9 million barrels. Analysts had pencilled in a gain of 900,000 barrels.
Back in Oran, an OPEC statement said the cartel's output reduction - larger than had been expected by markets - would take effect from January 1. The cartel had in September and October approved cuts totalling 2.0 million barrels a day.
