U.S. benchmark West Texas Intermediate for January delivery fell US$1.83 to US$35.52 a barrel on the New York Mercantile Exchange, its lowest closing price since February 2009.
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US crude inventories have swelled to 130 million barrels above the five-year seasonal average, EIA data showed. However, higher USA interest rates usually strengthen the dollar, making dollar-denominated commodity prices, including crude oil, more expensive for foreign purchasers.
Iran now exports about 1 million barrels per day (bpd) of oil to Asian clients and Turkey under a preliminary nuclear deal.
Expectations that the U.S. Congress will lift a 40-year ban on U.S. crude oil exports in the near term is also weighing heavily on prices.
Supplies at Cushing, Oklahoma, the key delivery point for Nymex crude, rose by 607,000 barrels last week, above forecasts for a gain of 500,000 barrels.
OPEC producers see little chance of significantly higher oil prices in 2016 as extra Iranian production could add to surplus supplies and the prospect of voluntary output restraint remains remote.
Brent, the global benchmark, was at US$37,74 in early trading down 18 cents from its last settlement after rising slightly earlier yesterday.
The rating agency suggested that the integrated oil and gas sector will also need to further cut capital expenditures in 2016 despite a 20 per cent cut in 2015, as the sector will have negative free cash flow through the next year. Futures sank to $36.75 on Monday, a level not seen since the depths of the 2008 global financial crisis.
“Prices are going to go as low as they have to change behaviour”, said Rob Haworth, a senior investment strategist in Seattle at US Bank Wealth Management, which oversees $US128 billion of assets.
Ending the four-decade ban on most exports of crude oil, would end a years-long fight prompted by the boom in shale output that has already contributed to the supply glut.
With Opec flooding worldwide markets while United States drillers keep producing large amounts of crude, the Brent/WTI premium has halved over the last week to around US$1,50 per barrel.
The Federal Reserve is scheduled to release its decision on Wednesday at 2 p.m. EST (1900 GMT).
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Analysts say the Fed will raise interest from zero after years of unprecedented support for the USA economy.
