News / Business

Oil prices fall to fresh 12-year low

Saturday, 09 January 2016 4:51 AM [ Last Update: Saturday, 09 January 2016 4:52 AM ]

This file photo shows oil drilling installations.

Oil prices continue to slide in world markets as global supply glut remains a major cause of concern.

On Friday, US benchmark West Texas Intermediate (WTI) for delivery in February fell to $33.16 a barrel on the New York Mercantile Exchange (NYMEX), the lowest since February 2004.

In London, North Sea Brent crude for delivery in February closed at $33.55 a barrel, down 20 cents from Thursday’s settlement.

“In all likelihood the demand won't come from anywhere, it is supply that has to come down to meet a new-normal of lower demand,” analyst Jasper Lawler at CMC Markets UK said.

In addition to the market oversupply, China’s market volatility and US petroleum inventory are blamed for the oil price decline.

“Can we go down another $3 a barrel? In percent terms, that's another 10 percent and could happen in a matter of one or two days of trading,” said Greg Sharenow, executive vice-president at the Pacific Investment Management Company in Newport Beach, California.

Dealers are unwilling to call an end to an 18-month slump in oil prices.

“I wouldn't say it's a given right now that we will break below $30, but I think before the first quarter we will,” Doug King, fund manager in London for the $220 million Singapore-based Merchant Commodity Fund, said.

“And the reason for that is you're not stopping enough production where it needs to be shut, like in the US,” he added.

Global oil prices have been under downward pressure since last year as the market has been plagued by a global supply glut, causing prices to fall from highs of above $100 a barrel in mid-2014. The oversupply has been mostly blamed on high production by member states of the Organization of the Petroleum Exporting Countries (OPEC) and the United States.

During its meeting last month, OPEC, which has 13 members including Saudi Arabia and Iran, decided not to slash its high output levels despite drastic fall in global oil prices. OPEC argued that the decision was made in a bid to maintain oil market share in the face of competition from North American shale oil output.

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