Oil tanks close to seven-year low on OPEC decision
Oil prices tumbled Monday with Brent crude diving to the lowest point for almost seven years, as the market was plagued by OPEC's refusal to cut output.
In afternoon trade, European benchmark Brent North Sea crude for January delivery hit $41.05 per barrel -- a level last seen on February 24, 2009.
US benchmark West Texas Intermediate for January struck $37.88 -- which was last witnessed in August earlier this year.
The Organization of the Petroleum Exporting Countries -- which pumps about 40 percent of the world's crude oil -- decided on Friday against cutting output to raise prices.
The 13-member OPEC cartel took no action to shore up the market and observers said it appeared to be in disarray.
"The decision by OPEC members to keep oil production output at record high levels has seen oil prices plummet again," said Sanjiv Shah, chief investment officer of Sun Global Investments.
He added that the decision "suggested that the organisation was effectively abandoning its long-term strategy of limiting production and acting as a cartel, leading to more downward pressures on oil prices in the short term".
OPEC countries are currently producing an estimated 32 million barrels per day, above the group's agreed 30 million barrel target.
With Iran expected to resume substantial exports next year, hopes were high that the cartel would lower supplies.
But it has now put off a production reassessment to its next meeting on June 2, 2016, and gave no official output figures following Friday's latest meet.
In late afternoon deals on Monday, Brent stood at $41.16, down $1.84 from Friday's closing level. WTI was $1.88 lower at $38.09.
"Crude oil prices were no doubt compressed by the lack of an agreement at the OPEC, signalling that the supply glut will persist longer," said analyst Bernard Aw at IG Markets in Singapore.
Traders were meanwhile switching focus to the US Federal Reserve's interest rate decision next week.
EY analyst Sanjeev Gupta added that market attention had now turned to an upcoming meeting of Fed policymakers and to the latest economic data from China, the world's top energy consumer.
Markets are watching whether the Fed will raise interest rates on December 16, a move that will boost the dollar.
A stronger US currency makes dollar-priced oil more expensive to holders of weaker currencies, and therefore tends to dent demand and weigh on prices.
"While all eyes are now on the Federal Reserve as it meets next week for the last policy meeting this year to decide whether to raise its benchmark rate, economic data from China will set the tone of prices in the coming weeks," Gupta said.
He said the dollar also got a boost from a strong US jobs report on Friday. The report strengthens the case for a Fed rate rise, analysts said.
© 2015 AFP