Oil extends crash into new year as glut fears deepen

Mon Jan 5, 2015 4:05pm EST
 
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By Barani Krishnan

NEW YORK (Reuters) - The selloff in global oil markets showed little signs of slowing in the new year, with prices down as much as 6 percent on Monday, the lowest since spring 2009, as fears deepened a supply glut that has vexed the market for six months would continue.

U.S crude crashed below $50 a barrel while benchmark Brent tumbled under $53 after data showed Russian oil output at post-Soviet era highs and Iraqi oil exports near 35-year peaks.

U.S. driller ConocoPhillips (COP.N: Quote) added to the bearish mood by announcing it struck first oil at a Norwegian North Sea project.

Top crude exporter Saudi Arabia revealed it made deep cuts to its monthly oil prices for European buyers ARM-OSP-E, the sixth time since June it has slashed prices, corresponding with the rout in crude futures markets over the period.

Analysts read the latest cut as reflecting Saudi Arabia's fierce defence of its market share. The Organization of the Petroleum Exporting Countries kingpin also trimmed its prices for U.S. refiners ARM-OSP-N for a sixth straight month, while raising rates for Asia.

The euro's tumble to 2006 lows, and slower-than-expected growth in U.S. manufacturing, completed the perfect storm for the oil markets.

"There's no doubt that we have a combination of supplies hitting their zenith at a time when demand is weakening," said Phil Flynn, an analyst at Price Futures Group in Chicago.

U.S. crude CLc1 settled down $2.65, or 5 percent, at $50.04 a barrel, and was at a post-settlement low of $49.77 by 3:15 p.m. ET (2015 GMT). The last time U.S. crude traded below $50 was in April 2009.   Continued...

 
A ship passes a petro-industrial complex in Kawasaki near Tokyo December 18, 2014.  REUTERS/Thomas Peter