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In this Jan. 23, 2015, file photo, vehicles form a line behind a motorist refuelling at a gas station, in Newark, N.J.

Julio Cortez/The Associated Press

Oil is poised to return to a bear market amid a seven-day slump to the lowest price in six years as record U.S. stockpiles worsen a global supply glut.

The U.S. benchmark fell as much as 3.3 per cent to $42.03 (U.S.) a barrel. A close at this level would be more than 20 per cent below this year's peak, meeting a common definition of a bear market. Crude inventories expanded by 9.62 million barrels last week, the Energy Information Administration said.

Oil has renewed its slide, following a slump of almost 50 per cent in 2014, amid speculation that a slowdown in drilling isn't enough to shrink a global oversupply. U.S. production and stockpiles have continued to expand from 30-year highs even as companies have pulled a record number of rigs from the country's oil fields. Prices also dropped as investors awaited the Federal Reserve's monetary policy decision.

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"People are worried that the crude that's building up in inventories will reach storage capacity," Gene McGillian, a senior analyst at Tradition Energy in Stamford, Connecticut, said before the report. "We haven't seen signs that production has been curtailed because of the measures taken by the producers. There is nothing to stem this slide in prices."

West Texas Intermediate for April delivery fell $1.22, or 2.8 per cent, to $42.24 a barrel at 10:31 a.m. ET on the New York Mercantile Exchange after reaching $42.03, the lowest level since March, 2009. The volume of all futures traded was about 11 per cent below the 100-day average for the time of day.

U.S. Supplies

Brent for May settlement slid 29 cents to $53.22 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a premium of $8.98 to WTI for the same month.

U.S. crude inventories gained for a 10th week to 458.5 million barrels in the seven days ended March 13, the most in weekly Energy Information Administration data dating back to August, 1982. Production accelerated to 9.42 million barrels a day, the fastest pace since at least January, 1983, according to the Energy Department's statistical arm.

Supplies at Cushing, Okla., the delivery point for WTI futures, rose 2.9 million to 54.4 million. The hub has a working capacity of 70.8 million, according to the EIA.

The Fed's monetary policy decision Wednesday may cause some short-term volatility for oil prices, according to Giovanni Staunovo, an analyst at UBS Group AG in Zurich. The U.S. may cut a reference to being "patient" on rate rises in its statement, Morgan Stanley and BNP Paribas SA said, giving it flexibility on the timing of an interest rate increase. The statement is due at 2 p.m. New York time.

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Iran Talks

Iran, OPEC's fifth-largest producer, said talks with the U.S. over its nuclear program are unlikely to yield an agreement this week.

Foreign Minister Mohammad Javad Zarif said he doubted "we can get there in the next two days," commenting in Lausanne, Switzerland, where talks are set to run until March 20. Negotiators have until March 31 to agree to a framework agreement.

Iran could increase exports by 1 million barrels a day if international sanctions were lifted, Oil Minister Bijan Namdar Zanganeh said.

The CBOE Crude Oil Volatility Index, which measures price fluctuations using options on the U.S. Oil Fund, advanced to about 59.85, almost three times what it was a year earlier. Higher volatility increases the likelihood of swinging in and out of bull and bear markets, making those markers less meaningful.

WTI's 14-day relative strength index is about 31, the lowest level since Jan. 15, data compiled by Bloomberg show. A reading below 30 typically signals the market is oversold.

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