Oil slumps 6 percent to near seven-year low on OPEC inaction, dollar

Mon Dec 7, 2015 3:56pm EST
 
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By Barani Krishnan

NEW YORK (Reuters) - Crude oil futures tumbled 6 percent on Monday, reaching their lowest in nearly seven years, after OPEC failed to address a growing supply glut, while a stronger dollar made it more expensive to hold crude positions.

Brent and U.S. crude settled at or near February 2009 lows in belated reaction to the Organization of the Petroleum Exporting Countries' (OPEC) policy meeting on Friday which ended without an agreement to lower production.

OPEC oil ministers dropped any reference to the group's output ceiling for the first time in decades, highlighting disagreement among members about how to accommodate Iranian barrels once Western sanctions are lifted.

"What matters from here is whether there'll be any meaningful production cuts in the U.S., which don't seem to be coming," said Doug King, chief investment officer in London for the Singapore-based Merchant Commodity Fund. As of Monday, the $220 million hedge fund was flat on the year after its bearish oil views helped it recoup a 10 percent loss through November.

"Price-wise, the market could be going for max pain after this," King said. "The leader to the downside will be probably be WTI, because that's where the production cuts have to come."

WTI, the West Texas Intermediate benchmark for U.S. crude CLc1, settled down $2.32 at $37.65 a barrel. That was its lowest settlement since February 2009, and after reaching a session low of $37.50.

Brent LCOc1, the global crude benchmark, settled down $2.27 at $40.73, after striking a February 2009 low of $40.60.

WTI forward contracts <0#CL:> through 2024 all dropped below $60 a barrel.   Continued...

 
An oil pump jack can be seen in Cisco, Texas, August 23, 2015.  REUTERS/Mike Stone