Oil macro analysis, page-105

Crude prices touch 11-year low

Brent oil prices plummeted to levels not seen since 2004 overnight, as an expanding global surplus due to high-paced production output sparked fears that prices will fall further.
At one point, Brent prices for front-month February delivery dropped nearly 2 per cent to levels just above $US36 a barrel on the London-based ICE Futures Europe Exchange, the lowest intraday level since the middle of July in 2004.

However, it recovered marginally into the close, ending down 1.4 per cent at $US36.35.
US Benchmark West Texas Intermediate ended flat at $US34.74 a barrel.
Both benchmarks have lost at least 35 per cent since the beginning of the year.
Analysts warned oil prices are likely to continue to suffer as both members and non-members of the Organization of the Petroleum Exporting Countries continue to engage in a battle for market share,
“The market is quite weak right now and for Brent to fall to $US35 a barrel is very possible in the near term but soon bargain-hunting by some hedge-fund managers will likely kick in to lift prices,” Daniel Ang, a Phillip Futures energy analyst, said.

The strengthening of the US dollar, the industry’s standard currency, has also battered oil prices recently, as a strong dollar makes oil more expensive for traders using foreign currencies. A weaker greenback overnight, however, helped prevent crude from falling further.
Last week, the US active oil rig count rose by 17 to 541, underscoring the strong resilience of US shale producers to keep pumping despite low prices. The latest tally put US crude inventories at 490 million barrels, which is the highest level seen in 80 years, according the US government.

Business Spectator