SINGAPORE: Oil expanded plunge on Tuesday to touch new 5-1/2-year lows, following a 5 percent fall in the last session as a slew of downturn aspects added to supply woes.
Worries about surplus oil supplies were fuelled by data showing output in Russia hit a post-Soviet-era high in 2014 and exports from Iraq, OPEC’s second-largest producer, were the highest since 1980. Jitters over political uncertainty in Greece drove investors out of risk assets globally to safe-haven bonds.
“It’s building on the recent bearish supply/demand outlook of oil, led originally by the OPEC meeting,” said Mark Keenan, who heads Asia commodities research at Societe Generale.
Brent crude gained 13 cents and was at US$53.24 a barrel by 0226 GMT, after dropping to a low of US$52.66 on Monday, it’s lowest since May 2009. US crude was up 7 cents at US$50.11 after slipping below US$50 for the first time since April 2009.
A slew of factors had combined to push prices lower, Keenan said, pointing to the concerns about Greece, high output from Russia, Iraq and the United States and a stronger dollar.
US commercial crude oil and products stockpiles were forecast to have risen in the week ending Jan. 2, a preliminary Reuters survey showed on Monday, and this could weigh on prices further.
A rise in the dollar index for the sixth straight month in December has made dollar-denominated oil more expensive for holders of other currencies, depressing prices.
Some economists expect cheaper oil to boost consumers’ purchasing power and buoy the global economy, but the 50 per cent plunge in oil prices since June has also raised deflationary fears.
“This is great news for motorists, but it presents a headache for policy makers, with the Fed keen to get their policy settings back to something more normal, and Europe keen to avoid a deflationary spiral,” ANZ analysts said in a note.
A rebalancing of portfolios of major commodity indices that starts on Thursday may widen the spread between Brent and West Texas Intermediate, according to Societe Generale.
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