Low oil price weighs on global stock markets

The latest retreat on price began on Friday as the OPEC cartel of nations, which provide a third of the world’s oil, confirmed it would be maintaining output to protect its market share from the challenge posed by USA shale oil.

Oil prices have fallen by more than 50 percent in a little over a year from levels of well over $100 a barrel, provoked by the slowdown in China and other emerging market economies and the end of sanctions against Iran.

Brent was down 25 cents at $40.48 a barrel by 5pm GMT, after setting a session low at $39.81.

Oil prices are in free fall since late Friday when OPEC chose to not declare an official quota in Vienna, but instead announced a continuance of actual production levels.

NEW YORK – Oil prices steadied on Tuesday but not before plumbing new lows seen during the 2009 financial crisis as an intensifying supply glut sparked fears the world will run out of storage for crude.

The global oversupply is being compounded by OPEC’s failure last week to agree a production ceiling, with members Iran and Iraq promising to ramp up output and exports next year. “Logically speaking any price recovery, if there is any, will be more likely in the second half of the year.”VOLATILITYWith a flurry of buying of options contracts on Monday, as traders sought protection from falling oil prices after the OPEC meeting, front-month volatility spiked”. Venezuela, in particular, is thought to be suffering badly as a result of the drop in oil prices.

The oil markets on Tuesday shrugged off negative stock market reaction to an otherwise negative trade data from China – imports fell 8.7% year on year in U.S. dollar terms in November, while exports declined 6.8%.

The Standard & Poor’s 500 index gave up 12 points, or 0.6 percent, to 2,064.

EUROPE DOWN: Germany’s DAX fell 2 percent while the CAC-40 in France dropped 1.6 percent.

“Retailers have been waiting for the pump-price dividend to filter into their stores, but for the most part we’re not seeing it”, said Jack Ablin, chief investment officer at BMO Private Bank. The rout in oil prices is hardly surprising, traders feel oil price is unlikely to find any support from OPEC in the coming months. Total crude stockpiles are now at 488.2 million barrels, the highest in almost eight decades, said the USA energy department. China’s November new vehicle sales also jumped 17.6 per cent over the same period.

He added high expectations the Federal Reserve would raise USA interest rates for the first time in nine years have been the other key factor that has hurt commodity-linked currencies.

January Brent crude on London’s ICE Futures exchange rose $0.31 to $41.04 a barrel. JetBlue Airways jumped $1.01, or 4 percent, to $26.49.