NEW YORK/LONDON: Oil prices fell by 3 percent to near six-year lows yesterday, with Brent briefly trading at par to US crude for the first time in three months as some traders moved to take advantage of ample storage space in the United States.
Traders were searching to store the glut of oil, which has knocked down prices 60 percent in the last six months. So far this week, Brent has lost 8 percent and US crude about 6 percent. Brent was down $1.48 at $45.95 a barrel by 1850 GMT, after falling to $45.19, its lowest since March 2009. US crude was down 65 cents at $45.42 a barrel, after hitting an April 2009 low of $44.20.
Oil tumbled earlier in the session after big Opec producer United Arab Emirates defended the group’s decision not to cut output to boost prices. The UAE said that the cartel could not stop world prices falling — and called for a cut in booming shale oil output in the United States.
“We cannot continue to be protecting a certain price,” UAE Energy Minister Suhail bin Mohammed Al Mazrouei said. “We have seen the oversupply, coming primarily from shale oil, and that needed to be corrected,” he told participants in the Gulf Intelligence UAE Energy Forum in Abu Dhabi.
Global oil prices have slumped by almost 60 percent since June, as the market faced abundant supplies, demand fears and a strong dollar in a stuttering global economy. The slide accelerated in November when the Organisation of Petroleum Exporting Countries maintained its production ceiling at 30 million barrels per day.
Venezuela, which wanted Opec to cut production, yesterday saw Moody’s slash the country’s debt rating by two notches to “Caa3” saying its lost oil revenues had “clearly increased” the risk of bankruptcy. For non-Opec member Russia, the plunging oil prices, coupled to Western sanctions over Ukraine, have hit its currency hard, with the rouble losing 41 percent against the dollar in 2014. Yesterday, the rouble dropped around a further 5 percent.
In Scotland the energy minister appealed to the government in London to take measures to help the North Sea oil industry deal with “serious challenges” from the lower oil prices.
The breakneck growth in shale oil output has made the United States a major producer again and has led to reduced need for crude imports from the Middle East.
Kuwaiti Oil Minister Ali Al Omair said that “nobody can justify the drop now,” but “we expect this situation to continue until the surplus on the market is absorbed and the world economy improves.” He said forecasts indicate that this will not happen before the second half of 2015.
“The market is in a bit of a panic now and the momentum is really quite negative. We haven’t seen any actions or comments that could reduce this aggressive selling,” said Ole Hansen, senior commodity strategist at Saxo Bank.
Reuters/AFP
