Oil nears 11-year lows

Oil markets tank as producers threaten new price wars; Brent trades 13 cents above 2008 crisis lows

Crude oil extended its slide on Monday, but steadied after moving within a hair of 11-year lows, on mounting fears that the global supply glut would only worsen amid the price war between leading Organization of the Petroleum Exporting Countries (Opec) and non-Opec producers.

Brent and US crude futures fell by as much as four per cent to their lowest levels since the start of the 2008 financial crisis, before paring losses on some short-covering.

Traders and analysts were almost unanimous in their opinion that the market would go even lower.

Heating oil and diesel futures on both sides of the Atlantic dropped to fresh 11-year lows on mild pre-winter weather and growing inventories.

“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.

Brent futures was up 5 cents at $37.98 a barrel by 11:55 am EST (1655 GMT).

Earlier in the session, Brent traded just 13 cents above the $36.20 low set in December 2008. Below that level, Brent would be at its lowest since July 2004 — a year when oil was rebounding from single-digits lows hit during the 1998 financial crisis and when talk of a commodities super-cycle was just beginning.

West Texas Intermediate (WTI) futures, the US crude’s benchmark, rose 60 cents to $36.22, after making a run to as low as $34.53. WTI’s financial crisis bottom was $32.40.

Both Brent and WTI have fallen every day since the Opec on December 4 abandoned its output ceiling. In the past six sessions, the global benchmarks have shed more than 13 per cent apiece.

Opec has been pumping near record levels since last year in an attempt to drive higher-cost producers such as US shale firms out of the market. US output has fallen though not by much, while production from Russia — another big non-Opec player — has risen.

Opec supply is likely to increase by 1 million barrels per day next year, Morgan Stanley said in a research note.

“Almost the entirety of added supplies in 2016 will come from Iran, Iraq and Saudi,” it said. Iran has promised to ramp up supply once nuclear-related sanctions are lifted on its crude exports. Tehran is expected to raise crude and condensates exports by as much as 700,000 bpd by end of 2016.