Brent oil slumps under $50 for first time since 2009
European benchmark Brent oil briefly sank under $50 on Wednesday for the first time since 2009, but prices later recovered following mixed demand signals in the United States.
In morning London deals, Brent North Sea crude for delivery in February dived to another 5.5-year low at $49.66 a barrel, last seen in late April 2009.
"Brent crude broke through the psychologically-significant $50 a barrel this morning," said analyst Craig Erlam at trading firm Alpari.
"The fact that traders barely even hesitated at this level makes $40 a barrel for Brent crude look extremely likely."
However Brent quickly rebounded back above $50 and stayed there following data showing that US crude stocks dropped by 3.1 million barrels to 382.4 million in the week ending January 2.
Analysts interviewed by Bloomberg news agency had been expecting a rise of 911,000 barrels.
The drop in crude stocks was mitigated however by increases in stocks of refined oil products, and the crude stocks were still up by more than 6 percent year on year.
Analyst Connor Campbell at Spreadex said "the US crude oil inventories put a spanner in the works" of any sustained rebound.
He said that "despite a fall in the number of crude barrels produced, a rise in gasoline had a negative effect on the commodity."
The data overall failed to show any significant increase in demand in the world's top economy.
Brent crude for delivery in February ended the day with a gain of 4 cents to $51.14.
US benchmark West Texas Intermediate (WTI) for February gained 78 cents to $48.75 in midday trading in New York, having already collapsed under the symbolic $50 level on Monday.
Oil prices remain under pressure from OPEC's stance on maintaining its current production levels, market oversupply, weak demand and the strong dollar, analysts said.
Oil also sank as the euro hit another nine-year low at $1.1802 after news eurozone consumer price inflation dropped to negative 0.2 percent in December, adding to pressure on the European Central Bank to undertake monetary stimulus measures that will weaken the currency.
The strong greenback makes dollar-priced oil more expensive for buyers using weaker currencies, and this weighs on demand and prices.
- Momentum is everything -
"The move below $50 shows how momentum is everything here," CMC Markets analyst Michael Hewson told AFP.
"With no sign that OPEC will do anything about over-production, it seems likely that we could well see further declines towards $40 in the coming weeks -- particularly given that demand shows no signs of picking up.
"Weak growth and weak demand in China and Europe are likely to continue to be the main drivers as the battle for market share intensifies. We will probably still see sharp swings in the interim but the direction of travel seems clear, unless OPEC acts."
The oil market had slumped Tuesday to multi-year lows in another stormy day for global financial markets, as OPEC kingpin Saudi Arabia blamed weak global economic growth and declared it will stick to its guns on crude production policy.
On Monday, Saudi Arabia had reportedly cut its European and US export prices in order to maintain market share.
Oil has lost more than half its value since June 2014 owing to a global supply glut and slowing growth in major world economies that has hurt demand.
Losses accelerated late last year after the 12-nation Organization of Petroleum Exporting Countries (OPEC) cartel decided not to cut output in response to lower prices and oversupply.
- 'No end in sight' -
"As far as the slide in oil prices is concerned, there seems to be no end in sight for now," added analyst Markus Huber at broker Peregrine & Black.
"There is too much oil on the market partially due to sluggish growth in the eurozone and slower growth in China."
OPEC opted in November to keep its oil output ceiling at 30 million barrels per day (mbpd) despite ample global supplies.
Analysts said the move was aimed at stifling competition from new market players with higher costs -- in particular US shale oil producers.
© 2015 AFP