U.S. crude oil prices fell on Thursday, putting the commodity on track for possibly its lowest close in seven months.
The West Texas Intermediate crude contract for July delivery dropped about 1 percent to a session low of $45.20 a barrel, below its close of $45.23 on Nov. 29, the day before OPEC agreed to cut output to support the market.
The price teetered on this key line of support, recovering some of its losses to trade at $45.34 as of 9:22 a.m. EDT.
The next level to watch is $43.76, where WTI traded on an intraday basis on May 5 during a minor flash crash.
Falling below that level could cause prices to drop to the November low of $42.20, John Kilduff, founding partner at energy hedge Again Capital, warned on Wednesday.
The drop on Thursday extended losses after a 5.1 percent plunge in the previous session, sparked by a bearish report on U.S. stockpiles of crude and gasoline stockpiles from the Energy Information Administration.
Oil stockpiles in the United States surged by 3.3 million barrels in the week ended June 2, the EIA said Wednesday, confounding analysts’ estimates for a 3.5 million-barrel decline.
The report also showed a decline in gasoline demand, despite the onset of the summer driving season following the Memorial Day holiday.
Prices are likely to dip further and test $44 a barrel, but downside risk from current levels is limited, said Matt Smith, director of commodity research at tanker-tracking firm ClipperData.
“I think we get too much buying interest coming in because there’s demand coming through,” he told CNBC’s “Squawk Box” on Thursday.
Crude futures came under additional pressure on Thursday from signs of rising output in Libya and Nigeria, two OPEC members exempt from production cuts.
Tension is also high among OPEC members after Saudi Arabia and other Muslim majority nations cut diplomatic ties with Qatar over its alleged support for terrorism and its overtures to Riyadh’s regional rival, Iran.