UPDATE 2-Brent crude falls almost 2 percent to 2004 low as market rout heads …

20 Jan 2016 | Author: | No comments yet »

Brent oil tumbles to lowest level since 2004.

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.SINGAPORE — Brent crude oil prices fell to levels last seen in 2004 on Monday, dropping below the lows hit during the 2008 financial crisis on renewed concern over a global oil glut, with production around the world remaining at or near record highs and new supplies looming from Iran and the US. Brent prices for front-month February LCOG6, -0.79% 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. Brent futures fell almost 2% and dropped as low as $36.17 per barrel at about 5am GMT, the weakest since 2004 and below the $36.20 low reached on Christmas eve 2008.

Analysts said a strong dollar following last week’s US interest rate increase, which makes oil consumption more expensive for countries using different currencies, as well as a renewed increase in US oil rig counts, were weighing on crude prices. 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. Russian production has surpassed 10-million barrels a day, its highest since the collapse of the Soviet Union, while Opec output also remains near record levels above 31.5-million barrels a day. 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.

Adding to the existing glut is that new oil is likely to become available soon, with Iran hoping to ramp up sales in early 2016 once sanctions against Tehran are lifted. Iran will export most of its enriched uranium to Russia in coming days as it rushes to implement a nuclear deal and secure relief from international sanctions, Tehran’s nuclear chief was quoted as saying at the weekend. This comes only days after the US voted to lift a 40-year-old ban on crude exports that could lead to some of its excess production being dumped on the global market. The demand side offers bearish factors too, as most of the northern hemisphere is experiencing an unusually mild start to the winter, due in part to the El Nino weather phenomenon, denting demand for heating oil.

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