Brent crude falls below US$50 to five-year low
EUROPEAN benchmark Brent oil sank under US$50 yesterday for the first time since 2009, hit by the Organisation of the Petroleum Exporting Countries' (Opec) stance on maintaining its current production levels, market oversupply, weak demand and the strong United States dollar, analysts said.
In morning London deals, Brent North Sea crude for delivery in February dived to another 51/2-year low at US$49.66 a barrel, last seen in late April 2009.
"Brent crude broke through the psychologically significant US$50 a barrel yesterday morning," said analyst Craig Erlam at trading firm Alpari.
"The fact that traders barely even hesitated at this level makes US$40 a barrel for Brent crude look extremely likely."
US benchmark West Texas Intermediate (WTI) for February also tumbled yesterday to a similar low at US$46.85, having already collapsed under the symbolic US$50 level on Monday.
Oil also sank as the euro hit another nine-year low at US$1.1843 on lingering fears that Greece could leave the euro zone if an anti-austerity opposition party wins a general election on Jan 25.
The strong greenback makes dollar-priced oil more expensive for buyers using weaker currencies, and this weighs on demand and prices.
"The move below US$50 shows how momentum is everything here," CMC Markets analyst Michael Hewson told AFP.
"With no sign that Opec will do anything about over-production, it seems likely that we could well see further declines towards US$40 in the coming weeks - particularly given that demand shows no signs of picking up.
"Weak growth and weak demand in China and Europe are likely to continue to be the main drivers as the battle for market share intensifies. We will probably still see sharp swings in the interim but the direction of travel seems clear, unless Opec acts."
Meanwhile, traders were awaiting the weekly snapshot of crude inventories in the US, which is the top global consumer. Brent later stood at US$50.47, down 63 cents from Tuesday's close. WTI was 46 cents lower at US$47.51.
The oil market also slumped on Tuesday to multi-year lows in another stormy day for global financial markets, as Opec's largest producer Saudi Arabia blamed weak global economic growth and declared it will stick to its guns on crude production policy.