Oil price drops below US$50 for first time since 2009
PUBLISHED : Wednesday, 07 January, 2015, 5:41pm
UPDATED : Wednesday, 07 January, 2015, 6:49pm
Fuel prices are seen at a petrol station pump in Rome. Photo: Reuters
European benchmark Brent oil sank under US$50 per barrel on Wednesday for the first time since 2009, hit by Opec’s production stance, oversupply, weak demand and the strong dollar.
In morning London deals, Brent North Sea crude for delivery in February dived to a 5.5-year low at US$49.81 a barrel. New York crude had already slumped under US$50 on Monday.
“The move below US$50 shows how momentum is everything here,” CMC Markets analyst Michael Hewson said.
“With no sign that Opec will do anything about over-production, it seems likely that we could well see further declines towards US$40 in the coming weeks – particularly given that demand shows no signs of picking up.
“Weak growth and weak demand in China and Europe are likely to continue to be the main drivers as the battle for market share intensifies. We’ll probably still see sharp swings in the interim but the direction of travel seems clear, unless Opec acts.”
Traders work on the floor of the New York Stock Exchange (NYSE) on January 6, 2015 in New York City. Stocks were up slightly in morning trading following a steep decline yesterday partly on fears of a continued fall in global oil prices. Photo: AFP
Crude futures had tumbled on Tuesday to fresh multi-year lows in another stormy day for global financial markets, as Opec kingpin Saudi Arabia blamed weak global economic growth and said it will stick to its guns on production policy.
On Monday, Saudi Arabia reportedly cut its European and US export prices in order to maintain market share.
Oil has lost more than half its value since June owing to a global supply glut and slowing growth in major world economies that has hurt demand.
Losses accelerated in November after the 12-nation Organisation of the Petroleum Exporting Countries (Opec) cartel decided not to cut output in response to lower prices and oversupply.
Opec opted to keep its oil output ceiling at 30 million barrels per day (mbpd) despite ample global supplies.
Analysts said the move was aimed at stifling competition from new market players with higher costs – in particular US shale oil producers.
