Oil prices punge to record low as Chinese stock markets stumble

Oil prices dipped below $33 a barrel on Thursday amid oversupply concerns and the weakening China economy.

US crude futures dropped more than 5% in early trade to just above $32 per barrel – the lowest since December 2003 – before steadying slightly.

Cheap oil has been a boon to energy importing economies including Ireland over that period – cutting the cost of everything from manufacturing to running cars and heating homes. U.S. crude oil inventories decreased by 5.1 million barrels last week, but gasoline inventories surged to 10.6 million barrels and distillate inventories climbed to 6.3 million barrel.

“There may be a short-term case for a technical price recovery, but the fundamentals remain firmly bearish as confirmed most recently by the net build in United States overall petroleum inventories for the week ended January 1”, said Tim Evans of Citi Futures.

Prices of petrol, diesel, LPG and jet fuel are headed downhill as worldwide prices of oil fell to a 12-year low on Thursday with the Indian basket of crude imports coming down to $31.33 per barrel.

Geopolitical concerns overhung the market, from the diplomatic crisis between Saudi Arabia and Iran, a stream of weak Chinese economic data and North Korea s announcement Wednesday of a successful hydrogen bomb test.

Oil prices eased to near 11-1/2-year lows on Friday, erasing earlier gains, pressured by persistent global oversupply and a bleak demand outlook.

“A fall below the landmark $30 level would send ripples from Riyadh to Houston as the embattled oil industry struggles to cope with a historic price rout”, Kantchev wrote.

The bank cut its forecast for global economic expansion in 2016 by 0.4 percentage point to 2.9 percent, though that is still faster than 2015’s sluggish 2.4 percent.

China allowed its yuan currency to slip yesterday, sending regional currencies and stock markets globally tumbling. US West Texas Intermediate (WTI) was up 46c at $33.73 a barrel. The current figure is the lowest price since early 2014.

“Most people are probably surprised that oil prices would go to this level”, said Statoil ASA chief executive Eldar Saetre.

This week’s turmoil in Chinese markets has raised the risk of slowing demand from the world’s No. 2 oil consumer, threatening to prolong an over year-long crude supply overhang.