Oil prices continued sliding Tuesday, hitting fresh seven-year lows, with Brent, the global benchmark, in danger of falling below $40 a barrel.
Advertisement
Brent’s potential move below $40 a barrel is making some traders reluctant to take any risks in this market until next week’s decision from the U.S. Federal Reserve on interest rates.
Later at around 1500 GMT, Brent trimmed its losses to trade at $40.50, down 23 cents from Monday’s close.
For the first time since early 2009, U.S. crude fell below $37 (34 euros) on Tuesday, dropping more than $1 from its last settlement on Monday.
The Organisation of the Petroleum-Exporting Countries decided at its meeting last week to keep production robust despite low prices.
Instead, its core members, led by top crude exporter Saudi Arabia, appeared to be readying for new battles for share in a market already heavily oversupplied and consuming nearly 2 million barrels per day less than it is producing.
The company added that the supply-demand balance in global oil market won’t be restored until the fourth quarter of 2016 due to the high surplus at the starting point, resilient non-OPEC supply, and slightly weaker yet still robust demand growth.
Crude oil prices were flat to modestly higher at the start of trading in NY.
By abandoning output restraint, analysts said the group was sending a message to other producers such as Russian Federation and North American shale drillers that it was willing to accept low oil prices to defend market share.
OPEC members failed to reach an agreement on production ceiling on December 4.
“Current prices should cause sufficient pain on non-OPEC producers, triggering further cuts in spending and investment”, said Giovanni Staunovo, an analyst at UBS Group AG in Zurich.
“Low oil prices will continue to weigh on the sovereign credit profiles of major exporters in 2016”, rating agency Fitch said.
China’s crude oil imports for the first 11 months of the year rose 8.7 per cent to 6.61 million barrels per day, with November crude imports growing 7.6 per cent from the same month a year ago.
As per latest OPEC data, its new reference basket of 12 crude oils closed at $38.08 a barrel on Friday.
Advertisement
A massive supply glut has wiped out two-thirds of oil’s value after it peaked at almost $108 a barrel in June 2014.
