Crude oil sees 11-year low with $36.33 a barrel

Brent crude oil prices hit their lowest in more than 11 years on Monday, while USA crude flirted with seven-year lows on more signs that swelling global supply looked set to outpace tepid demand again next year.

Oman futures on the Dubai Mercantile Exchange were down 80 cents at a low of $31.21 a barrel.

Brent crude slumped to the lowest level since 2004 amid speculation suppliers from the Middle East to the U.S. might exacerbate a record glut as they continue fighting for market share.

“This is an indication that covering short positions could be seen towards the year end, leaving bearish traders anxious about a spike in prices, although with low volumes”, Mr Sayed added.

Despite a rapid slowdown in output growth from producers outside of Opec, oil market oversupply has persisted.

Holiday shoppers are benefiting from a 68 percent drop in West Texas Intermediate crude over the past 18 months.

This comes only days after the US voted to lift a 40-year-old ban on crude exports which could see some of its excess production dumped on the global market. Led by No. 1 crude exporter Saudi Arabia and other big Middle East oil producers such as Iran and Iraq, the group pumped 31.7 million bpd in November. Qatar’s Energy Minister Mohammed Al Sada told reporters before the meeting in Cairo there was no need to be pessimistic about prices.

Last week, Saudi Arabia, Kuwait and Bahrain raised interest rates to protect their currencies amid widening budget deficits which are seriously worrying Persian Gulf Arab rulers.

Russian production has hit a post-Soviet record and the number of rigs deployed in the U.S. rose for the first time in five weeks last week by 17 to 541, according to industry figures supplied by the driller Baker Hughes.

USA oil production is expected to fall from its current levels of about 9.1 million barrels a day to 8.6 million barrels a day by mid-2016.

Whatever the medium-term picture, there is widespread agreement that the supply-demand fundamentals remain bleak in the near term.

Diesel prices have fallen much more slowly, however – averaging 106.39p a litre – as the RAC said the UK’s 11 million diesel drivers were effectively subsidising lower prices.

“Ultimately, [refinery] run cuts will be needed to balance distillates, which will weigh back on crude”, said Ms Sen. The weakest product seems to be heating oil right now due mild weather, said one senior oil trader, who spoke on condition of anonymity as he is not authorised to talk about trading strategies.