U.S. oil prices fell below $49 a barrel on Thursday amid deteriorating gasoline futures and a higher dollar in the wake of the European Central Bank's latest interest rate decision.
Benchmark and U.S. crude futures both fell more than 2 percent in late morning trade, extending losses to drop below their 200-day moving averages. Both contracts have fallen in 6 of the last 8 sessions, with only moderate gains on positive days.
The decline accelerated after the ECB left interest rates at zero percent, nudging the dollar higher. A stronger greenback makes dollar-denominated commodities like oil more expensive to holders of other currencies, discouraging buying.
News that Libya had restarted two of its main oil fields after protests also added to selling pressure. Libya is one of two exporters exempt from OPEC's production cuts aimed at reducing a global oversupply of oil.
That compounded weakness in the energy complex after the U.S. government reported a large build in gasoline inventories as refiners pumped a record amount of crude into facilities last week. This comes amid relatively weak gasoline demand.
U.S. gasoline futures once again dragged the energy complex lower Thursday, plunging 3.1 percent and touching the lowest level since Feb. 28. They are now down 9 percent this month and nearly 4 percent on the year.
The market had expected gasoline supplies to tighten heading into the peak summer driving season, but has been disappointed thus far, according to John Kilduff, founding partner at energy hedge fund Again Capital.
"This is a big problem for the complex — that the gas market could become glutted again. Demand hasn't been spectacular so it's a bad combination, to see this aggressive refining activity earlier than we normally see it," he said.
"We're really setting up for failure here in terms of price strength given what's happening here."
Things could get worse if futures fall just slightly further. Brent fell to $50.45 a barrel on Thursday, just above the key $50 technical level. U.S. crude fell as low as $48.20, breaching what Kilduff called a major trend line at $48.50 around midday.