U.S. oil extends slump, flirts with 6-year low as stocks build

By Barani Krishnan

NEW YORK (Reuters) - U.S. oil futures fell more than 2 percent on Thursday to trade near their lowest price in six and a half years, as data showing a big rise in key U.S. stockpiles intensified worries over a growing global glut.

A rise in the dollar, after higher U.S. retail sales in July and strengthening employment data, added to the weight on oil. U.S. crude prices fell as low as $42.07 a barrel, just four cents above the six-year trough touched in March. [USD/]

Oil has fallen by nearly a third since late June, a decline that continued this week after BP PLC's 413,500-barrel per day Whiting, Indiana, refinery, the biggest in the U.S. Midwest, was forced to shut down two-thirds of its capacity for over a month or more of repairs due to a leak, sapping demand for crude.

Losses deepened on Thursday morning after market intelligence firm Genscape reported that stockpiles at the Cushing, Oklahoma delivery point for U.S. crude futures has risen more than 1.3 million during the week to Aug. 11, adding to fears that the outage would cause stocks of surplus crude to swell. If confirmed, it would be the biggest build since March.

The front-month global crude benchmark Brent traded 70 cents, or 1.4 percent, lower at $48.96 a barrel by 11:46 a.m. EDT (1546 GMT).

U.S. crude futures on the New York Mercantile Exchange were down $1.10, or 2.5 percent, at $42.20 a barrel.

Some analysts said a breach of the March low could trigger a cascade of sell orders, driving prices sharply lower again.

"We are in the camp where prices will retest and fail to hold support at these levels," said Chris Jarvis, analyst at Caprock Risk Management in Frederick, Maryland. "We're likely get a capitulation trade in the $30 levels, a call we have been making since March."

Brent's premium to U.S. crude rose to hit a three-week high of nearly $7 a barrel.

(Additional reporting by Libby George and Lisa Barrington in London, and Henning Gloystein and Jacob Gronholt-Pedersen in Singapore; Editing by Marguerita Choy)