Oil slid below $50 a barrel on Monday, extending last month’s losses to hit the lowest level since January due to signs growing production will continue to outstrip supplies.
ICE September Brent crude — the global benchmark — fell 18 per cent in July. In the first session of August, it fell another 4 per cent, losing more than $2 a barrel to hit a six-month low of $49.81.
The renewed price pressure came as market participants focus on accelerating production from Opec countries, such as Saudi Arabia and Iraq, where output has reached new records amid a global competition for customers.
The fear of additional Iranian barrels seeping into the market after last month’s nuclear deal has added further downward pressure to prices.
“After three months of oil prices showing some promise and stability, July turned out to be a disastrous month for oil bulls,” said David Hufton, chief executive of London-based broker PVM.
“The prospects of a second half-year price rebound have evaporated and there is a clear and present danger of prices revisiting the previous lows of the year,” said Mr Hufton.
The oil rout that began a year ago gathered pace in November when the Opec producers’ cartel decided not to cut output in the face of a supply glut propelled by US production.
After falling to almost $45 a barrel in January, Brent rebounded to more than $69 a barrel in May.
But since then prices have fallen back by more than 20 per cent with many traders now forecasting a longer period of lower prices.
Speculators’ bets on rising oil prices have fallen sharply since May. Last week, hedge funds reduced their positions on higher oil prices by the most in 10 months.
Separately, Bijan Zanganeh, Iran’s oil minister, said on Sunday that the Opec member will be ready to swiftly raise production the moment sanctions linked to its nuclear program are removed.
“A day after the lifting of sanctions, we will raise [production] by 500,000 barrels per day,” he said, adding he expected sanctions to be removed as soon as November.
Despite the near more than halving in prices from this time last year, US oil output has proved resilient, with the number of rigs drilling for crude stabilizing in recent weeks.
Concerns over the state of the economy in China, the world’s largest oil importer, have also pressured the market.
“US producers are coming to the point where they start considering growth,” said analysts at Deutsche Bank.
West Texas Intermediate, the US crude marker, fell $1.12 to $46 a barrel.
Last week, the world’s biggest oil companies such as ExxonMobil, Chevron, Shell and BP, said the collapse in prices had crushed their profits.
This has prompted cuts of billions of dollars in spending and thousands of job losses.
Other commodities have also come under pressure. Copper hit a fresh six-year low of $5,163 a tonne on Monday and is close to entering a bear market — commonly defined as more than 20 per cent down from its recent peak.
Aluminium also hit a new six-year low of $1,601.50 a tonne.
The Thomson Reuters Core Commodities CRB index, which tracks a broad basket of commodities, fell close to levels last seen in early 2009 at the height of the financial crisis.
From: http://www.ft.com/
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