Oil Prices Slump to 11-Year Lows in Asia and Europe

20 Jan 2016 | Author: | No comments yet »

Brent Oil Prices Dip to Lowest in 11 Years.

LONDON — Brent crude prices hit their lowest in over 11 years on Monday, hounded by a relentless rise in global supply that looks set to outpace demand again next year. Oil production is running close to record highs and, with more barrels poised to enter the market from the likes of Iran, the United States and Libya, the price of crude is set for its largest monthly percentage decline in seven years.

Moscow time, Brent oil futures dropped 1.21 percent to $36.21 per barrel, earlier sliding to $36.18, less than the 2004 low of $36.2 per barrel. “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,” Daniel Ang, a Phillip Futures energy analyst told the Wall Street Journal Monday. While consumers have enjoyed lower fuel prices, producers have cut spending and thousands of jobs and the world’s richest exporters have been forced to revalue their currencies, sell off assets and even issue debt for the first time in years as they struggle to repair the holes in their finances.

Amrita Sen, chief oil market analyst, Energy Aspects this could be because of very poor heating demand. “Across the world we have had a warm start to the winter and there have been hardly any heating days in the US,” adding that even Europe is likely to be as warm as it has been. Russia’s 2016 budget bill, signed by President Vladimir Putin on Dec.15, projected the average price of Russian Urals oil at $50 per barrel in the next year. OPEC, led by Saudi Arabia, will stick with its year-old policy of compensating for lower prices with higher production, and shows no signs of wavering, even though every dollar lower in the oil price brings fresh pain to its poorer members. Brent futures fell by about 2 per cent to as low as US$36.05 per barrel on Monday, their weakest since July 2004, and were down 41 cents at US$36.47 at 1115 GMT. The demand so far especially from Asia has been good but now it may see a hit going forward, and with supply taking time to adjust, crude has come under renewed pressure, says Sen.

Last week Saudi Arabia, Kuwait and Bahrain raised interest rates as they scrambled to protect their currencies. “Really, I wouldn’t like to be in the shoes of an oil exporter getting into 2016. On Monday Iraq devalued its dinar currency to offset the impact of lower oil, while Azerbaijan ditched its currency peg after burning through more than half its foreign exchange reserves this year. However, supplies are responding and non-OPEC has come off quite sharply 2.2 million barrels per day in January to just 300,000 in November, OPEC also has some planned maintenance work which could make a dent in the supply going forward but not until February. US oil supply will make its way to global markets in the coming year after the government voted to lift a 40-year-old restriction on crude exports, but it will face stiff competition for market share.

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