Tuesday December 23, 12:30 PM
Oil prices trade under $40 per barrel
LONDON (AFP) - World (WRGR.TA - news) oil prices weakened on Tuesday, trading under 40 dollars a barrel in New York in subdued pre-Christmas trade, as traders eyed weak energy demand arising from a global economic downturn.
Light (LIGT3.SA - news) sweet crude for delivery in February shed eight cents to 39.83 dollars a barrel on the New York Mercantile Exchange (NYMEX).
The price of Brent North Sea crude for February eased five cents to 41.40 dollars per barrel on London's InterContinental Exchange (ICE).
"Crude oil markets were lower ... in generally thin conditions amid continuing news of lower global demand," said Sucden analyst Nimit Khamar.
He added: "Given thin conditions and continuing concerns about the global economy, markets may drift lower until the end of this year but stay broadly within a range centred near 40 dollars a barrel."
The contract for New York crude for January finished on Friday after tumbling to 32.40 dollars per barrel -- which was the lowest level since February 9, 2004 -- as investors raced to sell before the contract's expiry.
"Oil continues to tumble, as concerns of a world wide slowdown continues to hamper demand," added BetOnMarkets analyst Dave Evans.
"Japan, the world's third biggest importer of oil, said that crude imports fell by more then 17 percent last month.
"Oil prices should be able to use the 35-dollar-per-barrel level as support for the next little while."
Crude futures have collapsed by as much as 78 percent since striking record highs above 147 dollars per barrel in July, as a sharp global economic slowdown saps the world's demand for energy.
"The market is in freefall," said Mark Pervan, senior commodities analyst with ANZ bank in Melbourne, adding that current prices confirmed global weakness in demand.
Pervan noted that the recent rise in oil stocks in the United States caused New York prices to fall below their Brent counterpart in London, which is unusual.
"The Americans are storing oil now, and will sell it again in two to three months' time... when prices are better," he said.
Oil reserves in Cushing, Oklahoma, where light, sweet crude oil is stored, are at maximum capacity.
Traders will look Wednesday to a key weekly US energy (NASDAQ: USEG - news) report published by the US government's Department of Energy. The report is a key focus for the market because the United States is the world's biggest energy consumer.
Analysts said even pledges of production cuts from the OPEC cartel have failed to arrest the steep decline in crude prices.
The Organisation of the Petroleum Exporting Countries (OPEC), which produces about 40 percent of the world's crude, agreed last week to cut output by 2.2 million barrels per day in a bid to shore up prices.
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