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Oil slumps near $59 for first time since 2009 on oversupply

LONDON (Reuters) – Oil fell to just above $59 a barrel for the first time since May 2009 on Tuesday, extending a six-month selloff as slowing Chinese factory activity and weakening emerging-market currencies added to concerns about demand.

International benchmark Brent crude has almost halved since reaching a 2014 high of $115 a barrel in June on ample supply and slowing demand, and a switch in strategy by exporter group OPEC to defending market share rather than prices.

A report showing Chinese industrial activity shrank for the first time in seven months in December added to concern about oil demand. China is the second-largest oil consumer after the United States.

Brent crude fell as low as $59.02, its weakest level since May 2009, and as of 0914 GMT (04:14 a.m. EST) was down $1.81 at $59.25. U.S. crude was down $1.60 at $54.31 a barrel.

“The trend remains down,” said Robin Bieber, technical analyst and director at London-based oil broker PVM Oil Associates. “It is not advised to be long.”

Weakening emerging-market currencies and economies – the drivers of growth in global oil demand – also weighed on prices, analysts said.

In Russia, one of the world’s largest oil producers, the central bank hiked its key interest rate by 6.5 percentage points to 17 percent on Tuesday in an attempt to halt a collapse in the rouble.

In India, the Reserve Bank has been intervening in support of the struggling rupee in recent sessions, triggered by a worsening trade deficit, and in Indonesia the rupiah dropped to its lowest in 16 years against the U.S. dollar.

“The sharp decline in nearly all commodity prices and the weakening in commodity currencies creates headwinds for oil demand in the commodity-producing emerging markets in Latin America and the Middle East,” Goldman Sachs said in a report.

“Historically these regions didn’t contribute much to oil demand, today they do.”

(Additional reporting by Henning Gloystein in Singapore)

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