Feeding into the weak market sentiment, a survey showed that China’s services sector expanded at its slowest pace in 17 months in December, following on from weak factory data on Monday.
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U.S. benchmark West Texas Intermediate for February won 15 cents to $33.43.
According to them, the majority of market players also see tensions between Saudi Arabia and Iran negative for oil prices because they make unlikely any agreement within the Organization of Petroleum Exporting Countries (OPEC) for concerted action to reduce surpluses weighing on prices. U.S. crude futures subsided 46 cents to $35.95 per barrel, continuing their slide from Tuesday.
Capital Economics believes the oil price will not hit the lofty heights of $100 again for the rest of this decade.
Trading on its stock markets was suspended for the rest of the day, the second time this week, and China’s securities regulator intervened heavily by issuing rules to restrict share sales by listed companies’ major shareholders.
Brent LCOc1 was 25 cents lower at $33.98 a barrel by 12:18 p.m. EST (1718 GMT) after sliding during European trading to a low of $32.16, a level last seen in April 2004. The last time the price of Brent was so low was in July 2004.
But analysts said not even geopolitical strife in the Middle East was enough to prop up the price for long, given rises in production.
“Even if non-OPEC production (USA, Brazil, Canada) declines by 0.6-0.8 million barrels per day (bpd) in 2016, an increase in production from Iran and Iraq will continue to keep the market in an oversupply situation in 2016”, CRISIL Research director Rahul Prithiani said. The day ended with the country’s main index – the Shanghai Composite – down seven percent. That surprised oil traders and sent crude prices sliding.
U.S. government data showing an unexpected 5.1 million-barrel fall in crude stocks last week was overshadowed by a 10.6 million-barrel surge in gasoline supplies, the biggest build since 1993.
Meanwhile, analysts believe that the further that oil prices fall in the near term, the stronger the supply and demand responses are likely to be, and the sharper the subsequent rebound.
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Exacerbating the oil market woes is a weakening demand, especially in Asia, home to the world’s number two oil consumer, China, that is seeing the slowest economic growth in a generation.
