While there was a drawdown in oil supply, there was another build in stocks at Cushing, Oklahoma, the physical hub for Nymex crude, and that fanned continued concerns about strains in global storage capacity.
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Chinese data this week showed continued weakness in manufacturing, and one survey suggested sluggishness in the service sector. That and concerns about devaluation of the yuan weighed broadly on the energy and other markets.
But the irony is that geopolitical headlines that once were guaranteed to inject a quick pop into oil prices have done nothing. The rift over Saudi Arabia's execution of a Shiite cleric moved crude higher for just a few hours Monday before worries about the Chinese economy reversed gains.
"It's part of a 30-year war," said Edward Morse, global head of commodities research at Citigroup. "It's not going to go away. It will flare up from time to time, but I don't think it's going to flare up into direct confrontation that has to be worried about."
The situation intensified after Saudi Arabia on Sunday, and then some of its allies in the Gulf, broke diplomatic ties with Iran. That was after after a mob in Tehran burned the Saudi embassy, and Iran's supreme leader said there would be divine vengeance against Saudi Arabia's Sunni royal family.
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"People were confused by some of the reporting around the Saudi-Iran row, but I think it's clear now that it's an intense throw down over market share," said John Kilduff of Again Capital.
Brent crude futures for February sank more than 5 percent Wednesday, trading as low as $34.13, an 11-year low, and West Texas Intermediate crude futures also lost more than 5 percent to settle at $33.97 per barrel, a seven-year low.
The market share battle has been apparent in comments from both Iran and Saudi Arabia. Iran has been strident in touting it would immediately bring 500,000 barrels to market when sanctions against its nuclear program lift, and that it will bring on another 500,000 as soon as possible.
Meanwhile, Saudi Arabia shows no signs of backing off its commitment to keep pumping oil while letting the market set prices. That strategy has generated a budget deficit and forced it to cut back on domestic subsidies on fuel and other services.
But as some speculate Iran may now be concerned about the negative impact of its bravado on the oil market, officials this week have been quoted saying they do not want to hurt oil prices when they return crude to the market.
Mohsen Qamsari, director general for international affairs at the National Iranian Oil Co., told Reuters that Iran does not want to start a price war, that it will be more subtle in its approach and may gradually increase output. "I have to say that there is no room to push prices down any further, given the level where they are," he said.
While analysts do not expect the friction between Iran and Saudi Arabia to escalate into a military clash beyond the proxy wars in Syria and Yemen, there is still risk.
"There's a potential for this to cause further unrest, and I think that's the real issue," said Michael Cohen, head of energy commodities research at Barclays. "The thing to understand is while the threat may be higher, the ways in which Saudi Arabia has mitigated that threat has improved over the last decade."