Oil hits near seven-year low as global glut concerns persist
LONDON – US crude fell to a near seven-year low on Thursday, as oversupply concerns persisted, and prices were seen as vulnerable to further weakness in the run up to year-end.
Brent futures are down more than 11 percent this month and, having dipped below $40 per barrel, there are renewed expectations it might test 2008’s low around $36.
Brent futures were 24 cents lower $39.87 per barrel at 1340 GMT (0840 EDT), having traded as high as $40.70.
West Texas Intermediate (WTI) U.S. crude futures were down 45 cents at $36.71 per barrel, having touched a low of $36.52, a trough since February 2009. WTI is down around 13 percent this month.
Crude inventories fell 3.6 million barrels in the week to Dec. 4, compared with analysts’ expectations for an increase of 252,000 barrels, U.S. Energy Information Administration (EIA) data showed.
While this gave a slight boost on Wednesday and in early trading in Europe and Asia, bearish investors once again came to the fore in early U.S. trading hours.
“It will take quite a serious catalyst to end the bearishness,” said Richard Mallinson, geopolitical analyst at Energy Aspects.
The Organization of the Petroleum Exporting Countries last week failed to reach an agreement on production quotas, leading to fears that increased production from Iran and elsewhere would increase the glut further.
“OPEC showed last week it’s a paper tiger in that it won’t do anything to prevent supply growth,” said Michael Hewson, chief market strategist at CMC Markets.
OPEC forecast on Thursday that oil supply from non-member countries would fall more sharply next year, a development that would suggest its strategy of defending market share is working.
Oil has traded in a tight range close to $40 per barrel since Monday when it fell to its lowest since 2009.
Hewson said that in thin liquidity up to year-end there is a good chance Brent will fall below its low since 2008 at around $38 per barrel.
Still, there were signs of more demand from China, the world’s second-biggest oil user. Vehicle sales were up 20 percent in November from a year earlier to 2.5 million vehicles, the China Association of Automobile Manufacturers said.
However there was also fresh evidence of market oversupply. The EIA data showed that U.S. distillate stockpiles rose by 5 million barrels, twice the expected increase and the sharpest increase since January. –Reuters