European benchmark Brent oil sank under $50 on Wednesday for the first time since 2009, hit by OPEC’s stance on maintaining its current production levels, market oversupply, weak demand and the strong dollar, analysts said.
In morning London deals, Brent North Sea crude for delivery in February dived to another 5.5-year low at $49.66 a barrel, last seen in late April 2009.
“Brent crude broke through the psychologically-significant $50 a barrel this morning,” said analyst Craig Erlam at trading firm Alpari. “The fact that traders barely even hesitated at this level makes $40 a barrel for Brent crude look extremely likely.” US benchmark West Texas Intermediate (WTI) for February also tumbled on Wednesday to a similar low at $46.85, having already collapsed under the symbolic $50 level on Monday.
Oil also sank as the euro hit another nine-year low at $1.1843 on lingering fears that Greece could leave the eurozone if an anti-austerity opposition party wins a general election on January 25.
The strong greenback makes dollar-priced oil more expensive for buyers using weaker currencies, and this weighs on demand and prices.
“The move below $50 shows how momentum is everything here,” CMC Markets analyst Michael Hewson told AFP.
“With no sign that OPEC will do anything about over-production, it seems likely that we could well see further declines towards $40 in the coming weeks — particularly given that demand shows no signs of picking up.
“Weak growth and weak demand in China and Europe are likely to continue to be the main drivers as the battle for market share intensifies. We will probably still see sharp swings in the interim but the direction of travel seems clear, unless OPEC acts.”
Traders were meanwhile awaiting the weekly snapshot of crude inventories in the United States, which is the top global consumer.
Brent later stood at $50.47, down 63 cents from Tuesday’s close. WTI was 46 cents lower at $47.51.
Oil has lost more than half its value since June 2014 owing to a global supply glut and slowing growth in major world economies that has hurt demand.
Losses accelerated late last year after the 12-nation Organization of Petroleum Exporting Countries (OPEC) decided not to cut output in response to lower prices and oversupply.
“As far as the slide in oil prices is concerned, there seems to be no end in sight for now,” added analyst Markus Huber at broker Peregrine & Black.
“There is too much oil on the market partially due to sluggish growth in the eurozone and slower growth in China.”
OPEC opted in November to keep its oil output ceiling at 30 million barrels per day (mbpd) despite ample global supplies.
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