Oil price plunges below $35

Around 1630 GMT, Brent North Sea crude for delivery in January traded at US$37.39 a barrel, down 54 cents compared with Friday’s close.

Oil has slumped to levels last seen during the global financial crisis as the Organization of Petroleum Exporting Countries effectively abandoned production limits to defend market share, fuelling a record surplus. Meanwhile, the United States benchmark West Texas Intermediate fell below US$35 a barrel early Monday.

WTI’s financial crisis low was $32.40 in December 2008.

Crude oil prices have dropped below $35 per barrel, the lowest since 2009.

Lower oil costs – and their knock on to petrol and diesel prices – have been a key factor holding down the overall level of price inflation in Ireland. Each contract corresponds to 1 000 barrels of oil. That caused global prices to sink, narrowing the discount for USA crude and limiting the chances for producers to sell their oil at a better price in the export market. Though production in Saudi Arabia fell slightly by 25,000 bpd to 10.13 million bpd last month, it was offset by a 248,000 bpd increase in output from Iraq.

“Nerves are fraying ahead of the Fed’s expected decision to lift USA rates on Wednesday”.

Pain was also acute in other corners of the energy market.

Year to date, the ICE U.S. Dollar Index has gained by more than 8%, while WTI oil prices are set for a loss of more than 30%. “It is the only thing out there that has the capability of stabilizing, and over time lowering gasoline prices”. Diesel futures fell 1.79 cents, or 1.6%, to $1.1277 a gallon, the lowest settlement since August 2004. The glut will persist at least until late 2016 as demand growth slows and OPEC shows “renewed determination” to maximize output, according to the International Energy Agency.

“While it is often said that a boom nourishes a boom, it might be more apt to turn this around and say that gloom is nourishing gloom on the oil market just now”, analysts at Commerzbank said in a note. It is a cost saving to oil importing countries, such as Ireland.

“The energy complex is showing no semblance of support at the start of this new week and some additional price weakness could be forthcoming as volume slips into the upcoming holiday period”, said Jim Ritterbusch, founder of Chicago-based oil consultancy Ritterbusch & Associates. The price of a gallon of gasoline is on the verge of tumbling below $2 a gallon for the first time since 2009.