Oil plunges below $29 on prospects of more Iran crude, China worries

Fri Jan 15, 2016 4:07pm EST
 
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By Devika Krishna Kumar

NEW YORK (Reuters) - Oil prices crashed 6 percent on Friday to close below $30 a barrel for the first time in 12 years, resuming this year's breathtaking rout as Chinese stock markets fell further and traders braced for an imminent rise in Iran's exports.

After closing higher for the first time in eight sessions on Thursday, U.S. and Brent crude futures plumbed new lows, taking this year's losses to more than 20 percent, the worst two-week decline since the 2008 financial crisis.

The slump was not over yet, some analysts warned, as the lifting of sanctions on Iran opens the door to a wave of new oil. The International Atomic Energy Agency (IAEA) is expected on Saturday to issue its report on Iran's compliance with an agreement to curb its nuclear program, potentially triggering the lifting of Western sanctions.

Shares in China, the world's No. 2 oil consumer, tumbled on Friday, with the Shanghai index ending down 3.5 percent to its lowest close since December 2014 and the yuan weakening sharply offshore. Adding to fuel demand concerns, U.S. data showed retail sales fell and industrial production weakened in December.

Brent LCOc1 settled down $1.94, or 6.3 percent, at $28.94 a barrel, sticking below the pivotal $30 a barrel mark after briefly dipping below that level in the previous two days. It fell as far as $28.82, the lowest since February 2004.

U.S. crude CLc1 ended $1.78, or 5.7 percent, lower at $29.42, after hitting a contract low of $29.13, its lowest since November 2003, earlier in the session.

The oil market is oversold after two weeks of almost unrelenting selling, some traders said. The relative strength index (RSI) fell this week to below 30, a technical level often regarded as signaling a market that has fallen too far.

Bearish traders may rush to take profits on short positions next week. Short positions in the U.S. contract rose to a record of more than 200 million barrels in the week to Jan. 12, according to U.S. data.   Continued...

 
A pump jack operates at a well site leased by Devon Energy Production Company near Guthrie, Oklahoma September 15, 2015.  REUTERS/Nick Oxford