|12-30-2014, 03:48 PM||#1|
Oil prices hit a fresh 5-year low on excess supply worries
Crude oil futures sank to five-year lows on Tuesday amid supply glut fears ahead of the weekly oil reserves report from the U.S. Energy Department.
February Brent crude oil finished at its lowest since May 15, 2009, while WTI Crude futures fell to the lowest since May 1, 2009, both marking a more than 50% fall from June. This was the third sharpest fall in the last 30 years.
Brent was last down 1.33% or 77 cents at $57.11 a barrel, while Nymex crude oil was down 68 cents at $52.92 a barrel. As of 09:32 GMT
Markets await on Tuesday weekly U.S. oil inventory data by the American Petroleum Institute, which should shed some light on The U.S. Energy Department’s supply report on Wednesday that is expected to show a decline of 250,000 barrels in the week-ended December 26. Last week’s data showed an increase of 7.2 million barrels.
Inventories usually decline at this time of the year considering stronger winter demand and usually at higher rates, so any buildup in reserves will put greater downward pressure on oil prices.
Analysts and traders are expecting more oversupply in the first half of 2015, with too small expectations of any bullish fundamental events to support a sustained price rebound, which means any recovery in prices of oil would be vulnerable.
Hurting oil prices as well was news out of Es Sider, Libya that the fire was extinguished at most of the oil storage facilities at the country’s largest oil exporting terminal.
Lower oil prices have prompted some of U.S. oil drillers to scale back their production, with reports of a decline of 37 onshore drilling rigs last week, according to a report by oil-field services company Baker Hughes Inc.
According to the report, this was the third consecutive week that marked a fall in drilling rigs.
However, the spending cuts by U.S. oil producers and the stopping of drilling rigs will take many months to translate into lower oil production. This continued rate of production is placing pressure on oil prices.
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