US oil settles down $1.07, or 2.5%, at $42.23 a barrel

How low can crude go?
How low can crude go?
Oil hits new 6 1/2 year low
Oil hits new 6 1/2 year low
U.S. crude prices plummet
U.S. crude prices plummet
Oil traders concerned about demand
Oil traders concerned about demand

U.S. oil prices tumbled about 3 percent to a nearly 6-1/2-year low on Thursday as data showing a big rise in key U.S. stockpiles intensified worries over a growing global glut.

U.S. crude settled down $1.07, or 2.5 percent, at $42.23 a barrel. It fell as low as $41.92 earlier, which was the lowest since March of 2009. Benchmark North Sea Brent crude oil was down 60 cents at $49.60 a barrel, ahead of Friday's expiry of its front-month contract.

A rise in the dollar, after higher U.S. retail sales in July and strengthening employment data, added to the weight on oil.

Oil has fallen by nearly a third since late June, a decline that continued this week after a spate of refinery outages sapped demand for crude.

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The largest of those refineries—BP's 413,500-barrel per day (bpd) facility in Whiting, Indiana, also the biggest in the U.S. Midwest—has been forced to shut two-thirds of its capacity for repairs to a leak that could last a month or more.

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 Whiting outage would cause stocks of surplus crude to swell. If confirmed, it would be the biggest Cushing build since March.

The case for MLPs & energy: Pro
The case for MLPs & energy: Pro

"The BP mishap could result in a backup in inventories in both Patoka and Cushing and result in a build in Cushing crude oil inventories in the coming weeks," said Dominick Chirichella, a U.S.-based consultant.

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Other bearish signals also weighed on prices.

OPEC's second-largest producer, Iraq, plans to export near-record volumes of Basra crude in September, adding to an already oversupplied market.

The U.S. Energy Information Administration also said on Thursday that Iran's release of oil held in storage could boost global supplies by 100,000 barrels per day this year, and that it had the "technical capability" to boost output by 600,000 bpd by the end of next year.

Additionally, while the International Energy Agency said on Wednesday that it expects 2015 demand growth to hit a five-year high, China's shaky economy, and recent moves by Beijing to devalue its currency, cast doubt on the country's potential oil consumption.

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China's implied oil demand fell in July from the previous month amid a drop in vehicle sales.

"All is not well with the Chinese economy," Howie Lee of Phillip Futures told Reuters Global Oil Forum.

Falling margins at Asian refineries have led Chinese and Korean refiners to cut production, thus lowering their demand for crude oil.

Correction: Oil touched a nearly 6-1/2 year low on Thursday. That was misstated in an earlier version.