Oil prices fall to new lows over poor demand
OIL prices dropped to fresh 51/2-year lows yesterday on worries about a surplus of global supplies and lacklustre demand.
Russia's oil output hit a post- Soviet high last year, averaging 10.58 million barrels per day (bpd), up 0.7 per cent, thanks to small non-state producers, Energy Ministry data showed.
Iraq's oil exports were at their highest since 1980 last month, an oil ministry spokesman said, with record sales from the country's southern terminals.
But oil producer group Organisation of the Petroleum Exporting Countries (Opec) has decided not to cut output, opting to let the market find its own level.
The two crude oil benchmarks - Brent and United States light crude, also known as West Texas Intermediate - have now lost more than half of their value since the middle of last year.
Brent crude for February dropped as low as US$54.85 a barrel, its weakest since May 2009, before edging back to US$54.90, down US$1.52, by 7.55pm Singapore time. US crude slid to US$51.36 a barrel yesterday, also its lowest since May 2009.
"The easiest path for oil is down," said Carsten Fritsch, senior oil and commodities analyst at Commerzbank in Frankfurt. "Almost all market news and the fundamental backdrop are negative and it is difficult to see much upside at the moment."
Morgan Stanley analyst Adam Longson agreed, saying it was "hard to see much improvement in oil fundamentals in the near term". "New supply has entered the market, offsetting Libya woes. Additional exports are coming primarily from Russia and Iraq," he wrote in a note to clients.
Lacklustre economic data from the US on Friday fuelled worries about the state of the global economy and the strength of oil demand. "Oil demand is unlikely be robust this year when we look at the state of economies in China, Japan and Europe," said Yusuke Seta, a commodity sales manager at Newedge Japan.
A weak euro may also have contributed to further oil losses as it reduces the purchasing power of euro holders for dollar-denominated oil.
Investors are also increasing bets on lower oil prices.
Open interest for US$40-US$50 strike puts have risen several fold since the start of last month, while US$20-US$30 puts for June this year have traded, said Stephen Schork, editor of Pennsylvania- based The Schork Report.
Conflict in Libya has reduced the Opec producer's crude output to around 380,000 bpd, said state-run National Oil Corp.