Crude futures plunged on Monday, with US oil dropping more than 3 per cent on a firmer US dollar and festering worries over a global supply surplus.
The fall was part of a wider decline in commodities that has also been stoked by worries over faltering demand from China, with prices for base metals such as copper and nickel tumbling.
US crude’s West Texas Intermediate (WTI) January contract had fallen $1.16, or 2.77 per cent, to $40.74 a barrel by 0740 GMT. It hit $40.59 earlier in the session, near levels seen on Friday before the December contract expired.
Benchmark front-month Brent futures for January lost 80 cents, or 1.79 per cent, to $43.86 a barrel, recovering from a session-low of $43.69.
“With the stronger US dollar, all of copper, gold and oil fell after Asian trading began ... there were also some selloffs which were not made last Friday,” said Kang Yoo-jin, commodities analyst at NH Investment and Securities in Seoul.
The euro hit a seven-month low versus the US dollar on Monday, with a stronger greenback making dollar-denominated oil contracts more expensive for holders of other currencies.
But Daniel Ang at Phillip Futures noted that a string of US economic data this week could test the dollar's strength, which has also seen it mark a seven-month high of 99.977 against a basket of currencies.
“With the US dollar index hovering near 100, we expect to see slightly more downside than up. This would mean that oil prices should be holding steady this week and should mean that supports of $40 and $43 for WTI and Brent January 2016 should hold.”
The US crude December futures that expired on Friday ended 15 cents down at $40.39 after hitting a low of $38.99, the cheapest since Aug. 27.
Meanwhile, Venezuela’s oil minister said on Sunday that OPEC cannot allow an oil price war and must take action to stabilise the crude market soon. When asked how low oil prices could go in 2016 if OPEC doesn’t change its policy, he said: “Mid-20s.”
Oil markets were keeping an eye on developing geopolitical tensions in the Middle East as Jordan’s King Abdullah will hold talks with Russian President Vladimir Putin on how to tackle “terror groups” led by Islamic State in Syria, an official source said.
Reuters
