Oil Nears 11-Year Lows as Fears of Glut Worsen

US crude rose 75 cents, or 2.1 percent, to $36.37. The contract ended on Monday up 1.9 per cent after falling to US$34.53, the lowest since February 2009.

According to Retuers, the drop marks the lowest WTI crude price in 11 years.

Both Brent and WTI have fallen every day since the Organization of the Petroleum Exporting Countries on December 4 abandoned its output ceiling.

 “OPEC’s strategy seems to be working”, writes The Atlantic’s Bourree Lam. “Low oil prices have already led to rig closures across America, and it’s expected that high-cost oil-production (the sort that is common in the US) will be the first to be edged out of the market altogether”. Earlier this month, OPEC declined to curb its production and instead maintained its status quo as it works to defend its market share against a surge in production from USA shale producers.

“Land storage capacity is now limited but OPEC keeps increasing production so the oil price is relentlessly trending down”.

In it’s latest oil market report the International Energy Agency warned that the global supply glut may persist into next year as global economic growth cools.

Gulf producers and Russian Federation have said they would not cut output even if prices fell to $20 per barrel.

“People are buying on the dips”, said Jeffrey Grossman, crude dealer at New York’s BRG Brokerage, who expects Brent to return closer to the $40-a-barrel level it fell under last week.

“Now, because Iran is about to come back into the market, it’s impossible to agree to any cut”.

The dollar rebounded from an earlier six-week low against a basket of currencies on expectations the Federal Reserve will announce on Wednesday the first rate hike in nearly a decade.

In a move that some see as Moscow calling Riyadh’s bluff, Russia’s Finance Ministry announced this week that it is drawing up plans based on the price of oil as low as $30 a barrel until 2022.

The U.S. benchmark rose Monday on speculation that Congress could lift the 40-year-old ban on most U.S. crude exports as part of a broader spending bill. As a result, worldwide markets have been saturated by a glut of supply, depressing oil prices throughout the globe.

“Whether they’re going to hike rates is probably a non-issue right now…it’s more in the communications, whether they’re going to signal a bit more positivity about the USA economy”, he said, which could reassure investors about demand in the world’s largest consumer of crude oil.