NEW YORK Oil prices fell nearly 6 percent on Tuesday as equity markets remained weak and forecasts of swelling record high U.S. crude stockpiles faced expectations that global demand will not grow quickly enough to erase the overhang of crude any time soon.
U.S. gasoline futures fell to a 2008 low ahead of the American Petroleum Institute's (API) weekly report expected to show crude and gasoline stocks growing to new record highs.
Weak equity markets also toll their toll on oil. Wall Street's key S&P 500 index was down 0.5 percent by 12:54 p.m. EST (1754 GMT) after falling more than 1 percent over the past two sessions.
"There has been a high degree of correlation between equity markets and oil markets lately," said David Thompson, executive vice-president at Powerhouse, a commodities-focused brokerage in Washington.
Brent crude was down $1.84, or 5.7 percent, at $31.04 a barrel.
U.S. crude fell 96 cents, or 3.2 percent to $28.73.
U.S. gasoline futures fell almost 5 percent and heating oil was down nearly 6 percent.
U.S. crude stockpiles likely rose 3.9 million barrels in the week ended Feb. 5, said a Reuters survey taken ahead of the API data due at 4:30 p.m. (2130 GMT). The API data runs before official stockpile numbers on Wednesday from the Energy Information Administration (EIA).
The EIA in a separate report on Tuesday that said it has lowered its oil demand growth forecast for 2016 by 110,000 barrels per day and 2017 by 260,000 bpd.
The EIA report came after another report from the International Energy Agency (IEA) which said it did not expect global demand for oil to grow quickly enough to erase the overhang of crude any time soon.
The IEA, the West's energy watchdog, cut its forecast for 2016 oil demand growth, which now stands at 1.17 million barrels per day (bpd) following a five-year high of 1.6 million in 2015, and reduced its estimate of demand for OPEC crude.
"The IEA report was a bearish blow, followed by the EIA report which sings from the same hymnsheet," said Matt Smith, director of commodity research at energy data provider ClipperData.
The world's largest oil trader, Vitol, said it expects global oil demand to grow by around 1 million bpd this year, down from last year's rate 1.6 million bpd.
The dollar tumbled to a four-month low but that did not do much for oil prices which usually get a boost from the currency's depreciation versus the euro and others.
(Additional reporting by Amanda Cooper in London and Aaron Sheldrick in Tokyo; Editing by Marguerita Choy)
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Updated Date: Feb 09, 2016 23:45:11 IST