Crude-oil prices slumped Tuesday, as an earlier advance evaporated.
Oil had recovered slightly following a drop to near seven-year lows, but analysts have said worries of a persistent global glut will keep prices under pressure.
Crude futures for delivery in January
traded at $36.94 a barrel, down 71 cents, or 1.9%. January Brent crude
fell by 53 cents, or 1.3%, to $40.17 a barrel.
On Monday, Nymex prices dropped 5.8% to settle at $37.65 barrel and Brent lost 5.3% to $40.73 a barrel. Both grades hit their lowest settlement prices since February 2009.
Analysts view China’s 7.6% year-over-year increase in its crude imports in November as not having much impact on prices because it was within expectations, said Barnabas Gan, an OCBC energy analyst.
Oil prices have fallen sharply since last year after the Organization of the Petroleum Exporting Countries decided to keep output high and let the market determine prices. As a result, supply has outpaced demand and prices have hovered below $50 for months.
On Friday, the cartel decided to press ahead with the same policy, keeping OPEC’s daily production at 31.5 million barrels. While the decision was expected, it still sent prices reeling as the market braced itself for a “lower for longer” scenario.
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“The losses in the oil markets intensified post the OPEC meeting as investors grappled with the new reality of further supply growth from OPEC. In particular, the apparent disagreement between Saudi Arabia and Iran raised the spectre of further gains in Saudi oil output if Iran’s exports are raised more than expected,” said ANZ Research in a report.
Analysts said the cartel will likely review its policy next year once the impact of Iranian oil coming back to the market becomes more apparent. The Iranian government has previously said it expects to supply 500,000 barrels of oil a day during the initial stage after sanctions are lifted.
Some traders say prices may see nudge slightly higher in the near term, thanks to bargain-hunting but the long term view remains bleak as oil production, both in and outside of the cartel, remains high.
In the U.S., crude production has seen a marginal slowdown in the last few months but still remains above 9 million barrels-day range. Total crude stockpiles are currently at 488.2 million barrels, the highest in nearly eight decades, said the U.S. Energy Department.
Nymex reformulated gasoline blendstock for January
— the benchmark gasoline contract — fell by 6 cents to $1.21 a gallon.