Oil extends loss to trade near 12-year low

With capacity to store oil exhausted in some places, prices may need to drop low enough to halt crude output that can no longer be stockpiled, said Jeff Currie, Goldman’s head of commodities research.

Many have been hoping that low oil prices would boost oil demand.

“Until we hear an indication from a country or from a large producer that they are prepared to cut their own production, I would severely discount these comments”, he told AFP.

“Continuing increases in global oil inventories are expected to keep oil prices under $40 a barrel through August”, said Adam Sieminski, EIA administrator, in a statement.

Brent for April settlement declined as much as 59 cents, or 1.9 per cent, to US$30.25 a barrel on the London-based ICE Futures Europe exchange.

“It seems that the overall negative effect from the sharp decline in oil prices since mid-2014 has outweighed benefits in the short-term”, Opec said.

Despite oil prices reaching levels not seen in more than 10 years last month, OPEC also cut its oil-demand growth forecast by 10,000 barrels a day for this year.

Seeking protection against wild swings in prices, oil traders have scrambled to scoop up options, sending a key volatility index to its highest level since the worst of the global economic crisis in 2008, data showed.

Saudi Arabia and other Arab members of OPEC have so far stopped the group from propping up prices by lowering output, in an apparent effort to use the current slump to win market shares from the United States, where oil production is costlier than in the Gulf. Despite the low oil price, the other big oil pumpers, like the US and Russian Federation, also maintained their high-level oil output.

The U.S. Energy Information Administration (EIA) lowered its 2016 oil demand growth forecast to 110,000 barrels per day (bpd) from a growth of 160,000 bpd previously.

It noted that the Organisation of the Petroleum Exporting Countries (OPEC) was chiefly responsible for the oversupply, adding that Saudi Arabia, Iraq and Iran – which has just seen nuclear-linked sanctions lifted – had “all turned up the taps” in January.