Oil down almost 10% in 2 days as hunt for bottom continues

[NEW YORK] Global oil markets slumped for a fourth straight session on Tuesday, as mounting worries about a supply glut pressured crude prices, which are down almost 10 per cent this week to hit their lowest since spring 2009.

Traders said the trend for crude seemed lower, but prices could bounce up whenever there is a break in market sentiment. One such moment occurred on Tuesday when weaker-than-expected US economic data briefly suppressed the dollar. This brought crude off session lows, but only for an about an hour before the downward path resumed.

Refined products such as gasoline and heating oil also bounced up briefly in morning trade, rallying as investors took profits on short positions. But products later succumbed to the trend, and gasoline settled 2 per cent down.

Crude oil prices have plunged more than 55 per cent since June, when benchmark Brent traded above US$115 a barrel and US crude above US$107.

In Tuesday's session, Brent settled down US$2.01 at US$51.10 a barrel. It came close to testing the $50 support, falling to a May 2009 low of US$50.52.

In the first two days of this week, Brent has lost US$5.32, or almost 10 per cent.

US crude finished down US$2.11, or 4.2 per cent, at US$47.93, after plumbing an April 2009 low at US$47.55. "I think the likelihood of seeing US$46 to $45 is quite likely," Phillip Streible, senior market strategist at RJO Futures in Chicago, said. "People, I think, are further understanding that the US is becoming a powerhouse in creating crude oil and that's not going to change anytime soon." The selloff in oil began six months ago on concerns of oversupply in high quality US shale crude. It accelerated after the Opec meeting in November, when Saudi Arabia ruled out production cuts as a means of boosting prices.

On Tuesday, Saudi Arabia's King Abdullah said in a speech read for him that the country would deal with the challenge posed by lower oil prices "with a firm will", giving no signs the No. 1 crude exporter will cut supplies.

On Monday, the kingdom's announcement of further oil price discounts for its European and US buyers added to the bearish state of oil markets already staggering from Russian output at post-Soviet-era highs and Iraqi oil shipments near 35-year highs.

US commercial crude oil and products stockpiles were forecast to have risen in the week ending Jan 2, an expanded Reuters survey showed on Tuesday.

REUTERS

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