After sharp losses yesterday, oil prices have continued their biggest downward slump of the year as US benchmark West Texas Intermediate (WTI) dropped below $50 a barrel.
WTI is trading more than 2.5 per cent lower today at $48.79 a barrel while global benchmark Brent crude fell to a low of $51.60 a barrel.
Yesterday, oil prices posted their sharpest decline in 12 months on data from the US Energy Information Administration showing crude oil stocks were well above analyst forecasts.
The EIA reported US crude inventories rose by 8.2m barrels last week to 528.4m barrels, an all time high. Analysts were predicting a 2m barrel rise.
"This week’s large inventory build, the third substantial increase in four weeks, really appears to have hit home in the markets, triggering some significant losses over the last 24 hours and a break below the range it had traded within for the last three months," said Craig Erlam, analyst at Oanda.
This comes despite the Organisation of the Petroleum Exporting Countries (Opec) saying it reached record compliance with its proposed oil output cuts.
Erlam said: "Oil producers may have been patting themselves on the back in recent months about the success of the output cut, with compliance much higher than many expected, but with prices looking weaker once again, an extension to the deal may be more of a necessity than an option."
Rising oil inventories in the US "suggests a slippery path for energy prices moving forward, especially given the US’ will to decrease its energy dependency on the rest of the world under Donald Trump’s rule", said Ipek Ozkardeskaya, analyst at London Capital Group.
Earlier this week, oil prices fell as investors worried China will cut oil demand after it reduced its growth target for 2017 to its lowest level for more than 20 years yesterday.