Singapore – Oil resumed its slide in Asia Thursday, reversing earlier gains as the supply glut and weak demand that sent prices to more than 12-year lows showed no sign of letting up.
The commodity has taken a hammering so far in 2016, with both main contracts already down about 25 percent.
On Wednesday, US benchmark West Texas Intermediate (WTI) fell below $27 a barrel for the first time since May 2003, days after Brent touched below $28.
Bargain-hunting provided only momentary support earlier Thursday.
By 0630 GMT, WTI for March delivery, a new contract, was down 15 cents, or 0.53 percent, at $28.20 a barrel and Brent dropped 11 cents, or 0.39 percent, to $27.77.
WTI’s February contract sank to as low as $26.19 on its last day of trading in New York on Wednesday before closing at $26.55, the lowest level since May 2003.
Expectations that the US Energy Information Administration will report another increase in the country’s commercial crude stockpiles weighed down on sentiment, analysts said.
The price of oil has crashed about 75 percent since mid-2014, hit by oversupply, overproduction, weak demand and a slowdown in the global economy, especially China.
“With oil already hitting such a low, fundamentals are the key issue right now,” said Phillip Futures analyst Daniel Ang, referring to supplies continuing to outrun demand.
The Paris-based International Energy Agency (IEA) warned this week that the oil market could “drown in oversupply,” with the return of Iranian crude after the lifting of Western sanctions offsetting any output cuts from other countries.
While prices are expected to remain subdued, some analysts said they could be close to the bottom.
“I would think the bearishness will continue into the first half of the year, but in terms of hitting a bottom, we are more or less there,” Ang said.
“I’m really skeptical of prices hitting below $20,” he said, adding that “$24-$25 will likely prove a very strong support that shouldn’t break”.
BMI Research said the strong dollar will also help push down prices of commodities, including oil. Commodities are traded in dollars, making them more expensive to holders of weaker currencies.
“The ongoing depreciation of emerging market currencies and strength in the US dollar will keep commodities prices in check over the first half of 2016 and several of them are likely to reach new lows in the coming months,” it said in a note. – Agence France-Presse