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Brent oil prices dipped below $30 in Asian hours Thursday, underscoring weakness in the energy market amid a continued increase in the supply of the commodity.

U.S. WTI light sweet crude fell as much as 0.7 percent and was last at $30.66 a barrel while Brent oil fell as much as 1.9 percent to $29.73--its lowest level since February 2004--and was last at $30.05 a barrel.

Prices have tanked 20 percent just two weeks into this year and are about 70 percent lower since the summer of 2014 when prices started declining on a sustained basis.

Weighing on oil markets Thursday was a bearish report from the U.S. Energy Information Administration Wednesday which showed gasoline stocks surged by 8.4 million barrels while distillates stock jumped by 6.1 million barrels.

Nomura is one of the latest houses to lower its Brent forecast to an average of $40 a barrel this year from $55 a barrel previously on the back on the extended oil rout.

"We believe that Saudi Arabia intends to maintain market share in oil production with an assumption that, oil demand is resilient," analysts at the bank said.

Jason Reed | Reuters

Iran may also increase its oil output by about 400,000 to 500,000 barrels a day this year once U.S. and E.U. sanctions are lifted, while Libya is likely to increase its output once the national unity government is established, Nomura added.

U.S. WTI is now at a premium to Brent oil, a reversal of the previous dominant trend, as a larger supply of oil from the Middle East is expected to hit the market soon.

Richard Batley at Lombard Street Research in London said in a note that near-term risks of price declines are higher than that in 2015 with $20 a barrel now a possibility, although that price level would likely be temporary.

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