New York - Oil dropped to the lowest in more than five-and-a-half years amid growing supply from Russia and Iraq and signs of manufacturing weakness in Europe and China.
Futures capped a sixth weekly loss in New York and London. Oil output in Russia and Iraq surged to the highest levels in decades in December, according to data from both countries’ governments.
Euro-area factory output expanded less than initially estimated in December. A manufacturing gauge in China, the world’s second-largest oil consumer, fell to the weakest level in 18 months, government data showed yesterday.
Prices slumped 46 percent in New York in 2014, the steepest drop in six years and second-worst since trading began in 1983, as US producers and the Organisation of the Petroleum Exporting Countries (Opec) ceded no ground in their battle for market share.
Opec pumped above its quota for a seventh month in December even as US output expanded to the highest in more than three decades.
“We’re seeing more of the same,” John Kilduff, a partner at Again Capital, a New York-based hedge fund that focuses on energy, said. “The Chinese and European PMI figures signal weaker demand, while there’s ever-increasing supply. Nobody is cutting back on output and now the Russians are posting post-Soviet production highs.”
Brent for February settlement dropped 91c (R10.60), or 1.6 percent, to close at $56.42 a barrel on the London-based ICE Futures Europe. It’s the lowest settlement since April 30, 2009.
Volume for all futures traded was 34 percent below the 100-day average. European oil fell 48 percent last year, the second-biggest annual loss on record behind a 51 percent tumble in the 2008 financial crisis.
The euro lost as much as 0.8 percent to 1.2003 per dollar. A stronger US currency usually reduces the appeal of commodities as a store of value.
–Bloomberg