Oil prices sink further in Asian trade

[SINGAPORE] Oil suffered fresh losses in Asia on Wednesday, sinking to new multi-year lows as dealers watch Russia's ruble crisis and await the latest US crude supply report, analysts said.

US benchmark West Texas Intermediate for January delivery sank US$1.16 in afternoon trade to US$54.77 while Brent crude for February fell 71 cents to US$59.30 on the contract's first day of trading.

Brent for January finished down US$1.20 at US$59.86 in London, after slipping below the psychological US$60 for the first time since July 2009.

Oil investors are closely watching the situation in crude producer Russia after the ruble on Tuesday crashed to new record lows against the dollar, losing some 20 per cent in value.

The slump came despite the country's central bank hiking interest rates from 10.5 per cent to 17 per cent. Russia's economy has been battered by slumping oil prices and Western sanctions over Moscow's support for Ukrainian separatists.

"Should oil prices fall further, then worries may increasingly grow among Russian corporates and households," Credit Agricole said in a commentary.

With demand for the safer dollar in Russia, "authorities may have to consider measures to cap expectations of bank runs", the French lender said.

Singapore-based Phillip Futures said "there is a pretty good chance that (Russia) may be in for a default on their domestic bonds".

Dealers are also keeping a watch on the release later on Wednesday of a US oil supply report for clues about demand in the world's top crude consumer, analysts said.

Analysts surveyed by the Wall Street Journal tipped reserves to have fallen by 1.9 million barrels on average in the week to December 12.

However, oil prices are expected to stay low because of weak global demand and the Opec oil cartel's refusal to cut output despite a global supply glut.

AFP