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New York - Oil tumbled 5% to near six-year lows before recovering ground on Tuesday, and Brent briefly traded at par to US crude for the first time in three months as some traders moved to take advantage of ample storage space in the United States.
Traders were searching to store the glut of oil, which has knocked down prices 60% in the last six months. So far this week, Brent has lost 7% and US crude 5%.
Brent settled down 84 cents at $46.59 a barrel, after falling to $45.19, its lowest since March 2009.
US crude closed down 18 cents at $45.89, after hitting an April 2009 low of $44.20.
Oil tumbled earlier in the session after big Opec producer United Arab Emirates defended the group's decision not to cut output to boost prices.
Losses were pared by a flurry of short-covering toward the close, as players moved to cash in on profitable short positions, traders said.
Traders said the benchmarks converged as limited storage on land for Brent forced traders to look for storage in the Cushing, Oklahoma delivery point for US crude.
Storage tanks at highest vacancy rate
US onshore storage tanks for crude are barely a third full, showing the highest vacancy rate since the government's Energy Information Administration began its bi-annual survey of tank farm capacity in 2010.
Some said the convergence was not sustainable because the narrowed arbitrage attracted foreign imports.
In the case of Brent, some the world's biggest traders booked supertankers to store at least 25 million barrels at sea in recent days to try profit down the line if prices recover.
At least 11 very large crude carriers have been reported as booked with storage options, shipping sources and fixture lists show, rising from around five vessels at the end of last week. Each very large crude carrier can hold a maximum of 2 million barrels of oil.
Price differentials for UK North Sea Forties crude weakened on Tuesday, pressured by an abundant supply in the Atlantic basin.
The US government said domestic oil production will rise by 200 000 barrels per day in 2016, the slowest rate of growth since 2011, reflecting the long-term impact of plunging prices on drilling.
Traders continued to wonder when the price rout would end.
"Despite the magnitude of the selloff, there are no indications anyone knows what the bottom is," said Gene McGillian, senior analyst at Tradition Energy in Stamford, Connecticut.
