Brent crude oil recovered slightly after falling below $50 a barrel for the first time since May 2009 on Wednesday, as traders re-assessed their books after a sharp slide since the start of the year on a growing supply glut and weak global demand.
In choppy trade, benchmark Brent crude futures were down 25 cents at $50.85 by midday, having fallen as low as $49.66, a level last seen in May 2009.
“I wouldn’t be surprised if we trundle around the $50 mark for a few sessions as investors consolidate their positions just as they did when prices hit $60,” Sucden analyst Kash Kamal said.
Brent fell in the previous four sessions and is still down 8.6 per cent this week. Prices have lost around 55 per cent since their peak above $115 last June as stockpiles of oil mount with no signs of a cut in production from Opec.
Demand for oil is also weak, with the outlook for the global economy remaining subdued.
In the latest sign of economic slowdown, the pace of global business growth eased to its weakest rate in over a year at the end of 2014, according to JPMorgan’s Global All-Industry Output Index, produced with Markit.
Slide The slide in oil prices has increased fears of deflation, which in turn has further clouded the demand outlook.
In the euro zone consumer prices fell more than expected, and turned negative in December for the first time since October 2009, a first estimate by the European statistic office showed.
US futures were up 4 cents to $47.97 a barrel, having fallen to $46.83, their lowest since April 2009.
“There’s a surplus in production of 1-1.5 million barrels per day in 2015 and there’s absolutely no sign Opec will intervene to cut production at a time of lower demand,” said Bjarne Schieldrop, chief commodity analyst at SEB in Oslo.
He added that there was also little sign that prices at these levels were likely to have an impact on US shale production.
Shale oil costs are higher than for conventional oil, leading to speculation that the lower oil price could lead to cutbacks in production, helping to ease the supply glut.
Nobuyuki Nakahara, a former oil executive and ex-member of the Bank of Japan’s policy board, said he expected further price falls.
“Oil prices are likely to keep falling due to slower Chinese growth and because the years of prices above $100 before the recent plunge were ‘abnormal’ historically,” he said.
- Reuters
