Brent crude oil falls to 2004 low as market rout heads into Christmas

20 Jan 2016 | Author: | No comments yet »

Brent Oil Slides to 11-Year Low as Producers Seen Worsening Glut.

HONG KONG– Brent oil prices plummeted to levels not seen since 2004 in Asia on Monday, as an expanding global surplus due to high-paced production output sparked fears that prices will fall further.Brent crude slumped to the lowest price since mid-2004 amid speculation suppliers from the Middle East to the U.S. will exacerbate a record glut as they fight for market share.

Crude prices are set to rise from current “very low” levels that are hurting producers, Iraq’s Oil Minister Adel Abdul Mahdi said after a meeting of Arab petroleum-exporting nations. Brent prices for front-month February LCOG6, -1.79% delivery hit $36.17 a barrel on the London-based ICE Futures Europe Exchange, the lowest intraday level since the middle of July in 2004. Abdul Mahdi, whose country is the second-biggest producer in OPEC, didn’t forecast when prices would rebound from an almost seven-year low for Brent, the benchmark for more than half of the world’s oil.

Producers are focusing on reducing costs amid the price decline, Qatar Energy Minister Mohammed Al Sada said Sunday at a gathering of Arab oil-exporting nations in Cairo. Analysts said as both members and nonmembers of the Organization of the Petroleum Exporting Countries continue to engage in a battle for market share, oil prices are likely to continue to suffer. “The market is quite weak right now and for Brent to fall to $35 a barrel is very possible in the near term but soon bargain-hunting by some hedge-fund managers will likely kick in to lift prices,” said Daniel Ang, a Phillip Futures energy analyst. I think economic factors and fundamentals are still strong.” A global oversupply of crude has triggered the worst slump in the energy business since the 2008 world financial crisis. The strengthening of the U.S. dollar BUXX, +0.08% , the industry’s standard currency, has also battered oil prices recently, as a strong dollar makes oil more expensive for traders using foreign currencies. Last week, the U.S. active oil rig count rose by 17 to 541, underscoring the strong resilience of U.S. shale producers to keep pumping despite low prices.

U.S. crude stockpiles have expanded to 490.7 million barrels, more than 130 million above the five-year average, Energy Information Administration data showed last week. The spread between Brent and New York futures has shrunk to the narrowest in 11 months amid speculation that the U.S. plan to allow domestic oil to be shipped overseas may ease the nation’s oversupply. U.S. producers including Continental Resources Inc. and ConocoPhillips had been pressing for an end to restrictions on exports of most raw, unprocessed crude. While repealing the ban could allow unfettered access to supplies, driving the most important change in the country’s oil policy in more than a generation, buyers in the east may have a limited appetite for the quality of cargoes on offer.

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