Home >> Europe >> Oil slumps to new lows on supply glut

imageLONDON: Oil prices slid Tuesday to the lowest points for more than five and a half years, plagued once again by a global supply glut, demand fears and the soaring dollar.

US benchmark West Texas Intermediate for February tanked to $48.49 a barrel, touching a low last witnessed in late April 2009.

In morning deals in London, Brent North Sea crude for delivery in February dived to $51.23 per barrel, the lowest level since early May of the same year.

“The oil price fell further to print fresh five-year lows … on a combination of over-supply fears, a Saudi state-owned oil company cutting prices to Europe and the US, a strong dollar and increased bets on further falls,” said Mike van Dulken, head of research at trading firm Accendo Markets.

“This added to depressed global inflation expectations, while Greek political woes and its future within the single currency … added to existing unease about the global growth outlook.”

Later on Tuesday, WTI stood at $49.06, down 98 cents from Monday's closing level. Brent was $1.05 down at $52.06.

Oil had collapsed Monday, with New York crude breaching the psychological $50 mark for the first time since spring 2009. Over the day, WTI lost $2.65 and Brent shed a hefty $3.31.

“Oil prices got off to a disastrous start to the new year of trading,” added Commerzbank analyst Carsten Fritsch.

“The price slide is continuing (on Tuesday with) a plentiful oil supply still putting pressure on prices.”

This week's price slide also followed indications of rising output from key producers Russia and Iraq at a time when forecasters have trimmed their demand projections due to weak global economic growth.

A long rally in the greenback, which gained 11 percent last year against a basket of major currencies, has also weighed on the dollar-priced oil market by making crude more expensive for buyers using weaker units.

The euro hit a nine-year dollar low Monday on expectations of quantitative easing stimulus from the European Central Bank. Traders fretted also over the potential exit of Greece from the eurozone.

Crude futures had attempted to rebound in earlier Asian deals on Tuesday, but the rally was short-lived.

Oil has shed about 50 percent since June on worries about weak demand and a decision by the Organization of the Petroleum Exporting Countries (OPEC) not to cut output in response to lower prices and higher supplies.

Recent heavy losses are a reminder to the market “that oil fundamentals have not changed just because we entered into the New Year,” said Daniel Ang, analyst at Phillip Futures in Singapore.

“To further exacerbate the problem, a New Year means a new slate for oil bears and with them coming back to the market, this pushes the prices down further.”

OPEC decided in November to maintain output levels despite ample global supplies, in part due to cheaper oil extracted from North American shale rock.

OPEC kingpin Saudi Arabia insisted late last year that the cartel would not cut production — even if prices drop to $20 per barrel. The 12-nation oil-producing group pumps about 30 percent of global crude.

Copyright AFP (Agence France-Presse), 2014

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