Oil prices trade below $60 a barrel on Tuesday
What you need to know:
- US benchmark West Texas Intermediate for January delivery lost $1.90, closing on the New York Mercantile Exchange at $55.91, its lowest level since early May 2009.
- On Sunday, Abdalla Salem el-Badri, the secretary general of the 12-nation Organization of the Petroleum Exporting Countries, hinted that speculation was behind the steep price declines.
Global oil prices slid to new multi-year lows Monday after a top OPEC official suggested that speculation largely was driving the market lower, indicating the cartel would keep output unchanged.
US benchmark West Texas Intermediate for January delivery lost $1.90, closing on the New York Mercantile Exchange at $55.91, its lowest level since early May 2009.
The slide in crude prices has raised fears that operations on newly discovered reserves such as Kenya's could be suspended as investors adopt a wait and see attitude.
The lower prices have not filtered through to the consumer, despite the fact that a price rise is normally passed on to the consumer quickly.
Oil staged a small rally in early European trading from steep losses last week but that quickly evaporated, roiling European stock markets.
Oil prices have plunged roughly 50 percent since June, weighed down by plentiful supplies, the stronger dollar and weak demand arising from the struggling global economy, according to analysts.
"The move in oil was shown to be a dead-cat bounce and prices rolled over and erased most stock market gains with them," said Jasper Lawler, an analyst at CMC Markets UK.
GLOBAL DEMAND
Lawler said "lower oil prices almost unequivocally boost demand in the longer term but the realization is setting in for markets that part of the reason prices are falling rapidly right now is because global demand is slowing."
On Sunday, Abdalla Salem el-Badri, the secretary general of the 12-nation Organization of the Petroleum Exporting Countries, hinted that speculation was behind the steep price declines.
When we look at supply and demand, there is a rise (in supply) but only a modest one that should not have led to this 50 percent drop," Badri told reporters at a conference in Dubai.
"Speculation is strongly contributing to pushing prices down."
The OPEC oil cartel decided last month to maintain its current production level despite pleas by some producers to cut output in order to curb the price drop.
"The idea that the oil market will balance itself leaves the downside open, since it could well happen at a significantly lower price level," said Tim Evans of Citi Futures.
AFP
