Oil prices hit new depths on oversupply

London, Oct 15: Oil prices reached new multi-year low points today owing to a supply glut and weak global demand, before clawing back some ground as poor US retail data pressured the dollar.

Brent struck USD 83.37 a barrel -- the lowest level for nearly four years -- and the WTI contract dropped to USD 80.01, a point last seen more than two years ago. In later deals, Brent North Sea crude for delivery in November stood at USD 84.89 a barrel, down 18 cents compared with yesterday's close.

US benchmark West Texas Intermediate (WTI) for November was down 13 cents at USD 81.71. Losses were reduced however after official data showed US retail sales had dropped 0.3 per cent in September -- the first fall in seven months -- raising concerns even US growth may catch the cold that has hit Europe.

The data caused the dollar to slide, making crude oil priced in the US unit cheaper for buyers holding rival currencies, pushing up demand. Prices are however likely to continue falling "as long as OPEC makes no move to tackle this threat of a massive oversupply by reducing production", said Commerzbank analyst Carsten Fritsch.

Currently, members of the Organization of the Petroleum Exporting Countries, such as kingpin Saudi Arabia, are in fact slashing the prices they charge customers for their crude in order to gain market share. The International Energy Agency yesterday said it expects demand to have risen by just 700,000 barrels per day to 92.4 million barrels per day this year, 200,000 fewer than its previous growth forecast.

Market-watchers have blamed the slump in demand on weak growth in China, the world's biggest energy consumer, and the eurozone, which some analysts have warned is flirting with recession. Adding to the pain is an oversupply of the black gold caused by strong US production of shale gas and a return of Libyan oil on to the market after facilities that were closed due to civil unrest resumed operations.

"At some point, dwindling oil prices should be a positive for businesses but global headwinds, which include an Ebola outbreak and signs of slowing growth in China and Europe, have the upper hand for now," said Desmond Chua, market analyst at CMC Markets in Singapore.


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