Oil prices resumed their slide on Tuesday, with US crude falling below $37 per barrel and Brent below $40 for the first time since early 2009, amid fears the world was running out of storage capacity as a global glut intensifies.
The global oversupply is being compounded by the Organisation of Petroleum Exporting Countries’ (OPEC’s) failure last week to agree a production ceiling, with members Iran and Iraq promising to ramp up output and exports next year.
Benchmark Brent and WTI futures both fell more than 6% on Monday, and on Tuesday they hit fresh lows last seen during the credit crunch of 2008/09.
Brent futures were down 23 cents at $40.50 a barrel. US crude was trading at $37.44 a barrel, down 11 cents from its last settlement.
“OPEC has lost control of the oil market and unless something fundamental changes that causes demand to overtake the oversupply in the market, the path of least resistance is the 2008 lows of $35-$38,” said Michael Hewson, chief market analyst at CMC Markets.
Low oil prices globally also affected the commodities markets in India, while fresh concerns over passing of key reform bills, including the Goods and Services Tax, led domestic markets to a three-month low on Tuesday as the BSE Sensex slipped by 219.78 points, or 0.86%, to 25,310.33. Consequently, the BSE oil & gas index declined 2.14%.
The NSE Nifty settled 63.70 points, or 0.82%, down at 7,701.70.
“The cues were negative for the day as global markets corrected on fresh weakness in crude oil,” said Sanjeev Zarbade, vice-president, private client group research, Kotak Securities.