Oil languishes at four-year low amid global woes
OIL fell more than US$1 a barrel yesterday to a four-year low of below US$83 a barrel, as growing concerns over the global economy stretched a four-month rout.
Global benchmark Brent has lost more than 28 per cent since June on slow demand and abundant supply. Losses have accelerated this month on signals that the Organisation of the Petroleum Exporting Countries (Opec) has no plan to cut output.
Brent crude for November delivery dropped to US$82.72 a barrel, the lowest since November 2010, and was down 62 US cents at US$83.16 a barrel by 9.14am GMT. United States crude fell US$1.01 to US$80.77 a barrel.
"The market still seems very bearish," said Eugen Weinberg, an analyst at Commerzbank in Frankfurt. "And despite us seeing a floor around US$80, even this floor might come into danger if we don't have any signal from Opec any time soon."
Assets that depend on economic growth, such as shares and oil, have been hit by a raft of weak indicators from Europe at a time when other big economies, including China, Japan and Brazil, are facing their own hardships.
At the same time, the US Federal Reserve is set to wind down later this month the asset purchase programme that has boosted markets over the past two years.
Brent has fallen from a high of US$115.71 - a level reached in June on concern that the Islamic State in Iraq and Syria insurgency into Iraq would disrupt its supplies - and is well below the US$100 mark until recently seen as a level Opec members would defend.
"The US$30 fall since June has led to an intense discussion (over) whether prices could be in for a new norm," said analysts at JBC Energy in a report, which sees Opec cutting some output in the first half of next year to support prices.
"We see rather a deep slump than a permanent shift of - or a new norm for - oil prices. After all, we are really in a hyped downward spiral, where any bear item is overly emphasised."
Global economic worries deepened this week after China's consumer inflation fell to near five-year lows and US producer prices declined for the first time in more than a year. The International Energy Agency also cut its global oil demand growth forecast for next year.
Reports of ample supplies in the US added downward pressure on prices. According to industry group the American Petroleum Institute, US crude inventories rose 10.2 million barrels to 370.7 million barrels.