Crude oil prices fall almost 20 pct since beginning of the year
Hence, regardless of oil market fundamentals, if you think the USA dollar is going to continue strengthening this year, then you have to think that oil prices will continue to trundle lower. “The week started on a bad note and ended on a good one but the market response, worryingly, was the same to both – sell, sell, sell”, David Hufton, of oil brokers PVM Oil Associates, said in a note.
Although there was no news on China’s economy on Monday, the fact that share prices fell even after China’s central bank marked the currency up for the second day in an attempt to soothe markets after its recent devaluations was a worrying development. The lack of output quotas for individual members of the Organization of Petroleum Exporting Countries means none can be held accountable if they pump too much crude, according to Iran.
Oil prices have already fallen over 70% since the downturn began in mid-2014 as soaring global production sees hundreds of thousands of barrels of crude produced every day without a buyer, leaving storage tanks filled to the brim. “This is at the core of the policy dilemma China faces”.
Brent crude futures LCOc1 fell $2.00 to settle at $31.55 a barrel, their lowest since April 2004.
US West Texas Intermediate (WTI) crude futures were down 71 cents at $US32.45.
Iran is expected to launch its own oil benchmark in March as soon as global sanctions blocking exports are lifted.
Oil slumped last week as volatility in Chinese markets fueled a rout in global equities and USA stockpiles remained about 100 million barrels above the five-year average.
RBOB gasoline futures lost 0.019 dollar or 1.734 percent to trade at USD 1.094 a gallon at the NYMEX.
Brent crude, the worldwide benchmark, was off over 4% on Monday to as low as $32.30 a barrel.
Oil prices are getting decimated as the massive oversupply of crude overwhelms normal demand levels.
The reason for the fall is because oil market speculators had increased their net-short positions, which would profit from prices falling lower.
Prices are also being weighed by fears that the escalating tension in the Middle East will deter oil producers from cutting production.
Earlier in the European session, analysts at Societe Generale lowered their price forecast for the Brent front-month contract from $53.75 per barrel to $42.50.