Brent slides to as low as $52.30 on fears of prolonged supply glut
Brent crude oil prices fell further to hit a fresh five-and-a-half-year low below $52 a barrel in intraday trade on Tuesday as reports suggested top oil exporter Saudi Arabia had slashed its offer prices for supplies to Europe, compounding concerns about a prolonged glut.
The trimming of crude oil forecast price for 2015 by Citigroup, political uncertainties in Greece, plentiful supplies from Russia and Iraq and persisting worries about energy demand in Europe as well as China just compounded the already-prevailing bearish sentiment and weighed on prices.
Brent crude oil futures dipped to as low as $51.23 a barrel, its lowest since May 2009, before pulling back to $52.30 at 1227 GMT, still down 81 cents. US crude lost 77 cents to trade at $49.27 a barrel at 1227 GMT, after declining to $48.47, its lowest since April 2009. Both the crude benchmarks have now lost more than a half since mid-2014 and recorded their worst annual fall since 2008 last year.
While the drop in prices would help a big importer like India cut its petroleum subsidy, low oil prices have pulled down stock markets across Europe and Asia. In India, oil and gas stocks — led by ONGC — lost by up to 6% on Tuesday, as the Sensex closed down 3.07%, or 854.86 points at 26,987.46.
Saudi Arabia’s King Abdullah said the country would deal with the challenge posed by lower oil prices “with a firm will” but gave no sign the world’s top exporter was considering changing its policy of maintaining production in the face of fast-growing US shale supplies, according to Reuters.
Analysts said Saudi Arabia’s trimming of prices for supplies to Europe suggested Opec’s resolve to protect its market share in the face of growing threats from US shale producers. Last week, the US effectively cleared the way for exports of as much as a million barrels per day of ultra-light crude oil and ended silence on a four-decade ban on oil exports, saying it had started approving a backlog of requests to ship out processed light oil abroad.
The decision came after US crude oil stocks hit its maximum at least since 1982, aiding a glut in the market, caused by Opec’s decision not to trim output despite a dorp in prices.
Moreover, Russia’s oil production averaged 10.58 million barrels per day in 2014 — the highest in the post-Soviet era — while monthly exports by Iraq in December scaled their loftiest since 1980.
Already, US commercial crude oil and products stockpiles were also forecast to have risen in the week ending January 2, according to a preliminary Reuters survey, which could weigh further on prices.
Indicating the bearing sentiments would persist at least in the first half of the calendar year, a Citigroup report cut global brent oil prices to average $63 a barrel in 2015, down from $80, and for the US benchmark to average $55 a barrel this year.
The latest Citi report, however, forecast prices rebounding only later this year and into 2016 as well, as low prices could finally prompt a production pullback — particularly by Opec members such as Libya and Venezuela who have been pitching for a cut for some time now with their more important members including Saudi Arabia — and as global economic growth improves.
Copper holds near 4-1/2 year low
London copper dipped on Tuesday to hold near a 4-1/2 year low, dragged lower by a rising dollar, falling energy prices and concerns about the outlook for demand from top consumer China as the country moves to raise output.