Oil Falls to Near 11-Year Low as Oversupply Worsens

Another wildly unpredictable trading session on Monday catapulted the UK’s leading stock market to highs of 6,009 – a rise of 0.96pc – before it tumbed 1.32pc to close at 5,874.06, its lowest level since December 2012.

In an attempt to gain the market share that Iran has lost since the trade sanctions were placed, Iran is looking to ramp up production to pre-sanction levels. This represents a level not previously seen since February 2009.

“We’ve been going straight down like a plumb line”, said Mark Benigno, co-director of energy trading at INTL FCStone Inc. Energy companies have had to scramble to pay bills and fund new operations and sometimes have laid off workers. It could also further destabilize credit markets, which are reeling from a steep selloff in junk bonds. Commodity importers like India will continue to benefit but EMs like Russia, Brazil and Australia will have to find other ways to kickstart growth; Investors will continue to shy away from commodity-linked stocks like BHP, Vedanta etc and stocks linked to commodity producers like public sector banking stocks in India for instance.

Adding to the unease on trading floors is Wednesday’s Federal Reserve policy meeting that is widely expected to see United States interest rates raised for the first time since 2006.

One seasonal factor in oil’s recent decline is warm winter weather across the northern hemisphere denting demand for oil and gas. Each contract corresponds to 1,000 barrels of oil. In fact, the world’s two global benchmarks, Brent crude and West Texas Intermediate, recently dipped below $40.

As an oil importer, lower oil prices are clearly a boost to Ireland, cutting costs for consumers and businesses. The U.K.-based Barclays bank said that given a host of negative issues the oil price could remain fixed in the US$35-$38 a barrel range into the second quarter of next year.

The two benchmarks began to converge – a step toward eliminating the once-deep discount for US crude – in an indication that the market is shifting structurally.

“Arguably, the correlation between oil prices and the FTSE is as strong as it ever has been, and with oil breaking towards multi-year lows, this is not a good sign for stocks”. Diesel futures fell 1.79 cents, or 1.6%, to $1.1277 a gallon, the lowest settlement since August 2004.

According to secondary sources, currently, OPEC countries are producing 31.3 million barrels of crude per day which marks 1.3 million barrels more than the ceiling set for the organization.

3 Cosco Corp (S), the shipbuilding arm of China’s China Ocean Shipping Group, fell to 30.5 cents yesterday, the lowest price in more than 11 years, on last Friday’s news that it will post a “significant net loss” in the fourth quarter. However, analysts said the deal has little effect on oil prices in the near term, because it is still uncertain how the agreement will be implemented. The price of a gallon of gasoline is on the verge of tumbling below $2 a gallon for the first time since 2009.