By Devika Krishna Kumar
NEW YORK (Reuters) - Oil prices plunged 5 percent to their lowest levels this year on Wednesday as U.S. crude inventories surged to a new record high, stoking concerns a global glut could persist even with OPEC attempting to prop up prices with output curbs.
Crude stockpiles in the world's top energy consumer have been rising since the start of the year. They soared last week by 8.2 million barrels, more than quadruple the forecasts, as refineries cut output and imports rose, data from the U.S. Energy Information Administration showed. [EIA/S]
Close to a record number of bullish wagers, or long positions, in the crude market has set up the market for a large downward move if those positions are unwound, and Wednesday's move could signal the onset of that, traders and analysts said. [CFTC/]
Key support levels established after the tight trading range for prices this year are also being tested and a breach of those levels could trigger a fresh round of selling, technical analysts said.
"We're seeing some 'GMO trading', or 'Get-Me-Out' type trading," said Andrew Lebow, senior partner at Commodity Research Group in Darien, Connecticut.
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"Its a combination of overhang of (speculative) length and the overhang in inventories ... and the other thing unnerving the market is rapid growth in U.S. crude production."
U.S. West Texas Intermediate crude ended the session at $50.28 per barrel, down $2.86, or 5.38 percent after falling to its lowest level since Dec. 15.
Brent crude slumped to its lowest level since Dec. 8 at $52.93, before settling at $53.11, down $2.81 or 5.03 percent.
Both contracts also fell below their 100-day moving averages for the first time since late November, when the OPEC supply cuts were announced.
"This is one of those occasions where the news follows the trend and we've now tried for the better part of the year to get through the $55-$56 area for WTI specifically and we've failed," said Brian LaRose, technical analyst at ICAP in Jersey City, New Jersey.
"This is more of a catalyst and a wake-up call to a lot of people to say here's some fundamentals to back up what technicals have been saying for the last three weeks."
Key support levels for WTI to watch are the $51-$50 range heading to the end of the week, which are being tested in Wednesday's session, LaRose said, adding that if breached, the next levels to watch would be the $47-$48 range.
Also pressuring oil prices were expectations of a U.S. interest rate hike next week, which lifted the dollar against a basket of currencies, making greenback-denominated oil more expensive for holders of other currencies.
(Additional reporting by Alex Lawler in London, Ethan Lou in Calgary and Keith Wallis in Singapore; Editing by Marguerita Choy and Paul Simao)