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LONDON: Oil prices tumbled 4 per cent on Monday, coming close to their 11-year low, on growing fears that the global oil glut would worsen in the months to come in a pricing war between leading Opec and non-Opec producers.

Brent crude fell by 4pc to below $36.40 a barrel for the first time since December 2008 and US West Texas Intermediate (WTI) sank almost 3pc below $34.60 a barrel.

Brent traded only 14 cents above the lows last seen during the 2008 financial crisis of $36.20 a barrel.

If Brent falls below that level, that will be its lowest since mid-2004 — a year when oil was beginning its surge from the single digits it hit during the 1998 financial crisis and when talk of a commodity super-cycle was only beginning.

WTI’s financial crisis low was $32.40 in December 2008.

“Oil is coming under pressure as the lack of Opec cuts mean incessant oversupply continues,” said Amrita Sen from Energy Aspects think tank.

Both benchmarks have fallen every day since the Organization of the Petroleum Exporting Countries on Dec. 4 abandoned its output ceiling. In the past six sessions, they have shed more than 13pc each.

Opec has been pumping near record levels since last year in an attempt to drive higher-cost producers such as US shale firms out of the market.

New supply is likely to hit the market early next year as Opec member Iran ramps up production once sanctions are lifted as expected following the July agreement on its disputed nuclear programme.

“All new production will be earmarked for exports,” BMI Research said in a note. “In addition to volumes released from storage, Iran will be able to increase crude oil and condensates exports by a maximum of 700,000 b/d by end-2016,” it said.

Iran’s crude oil exports are set to hit a six-month high in December as buyers ramp up purchases in expectation that sanctions against the country will be lifted early next year, according to an industry source with knowledge of tanker loading schedules.

Iranian news agency Shana quoted on Monday manager director of Iran’s Central Oil Fields Company, Salbali Karimi, as saying Iran’s cost of production stood $1-$1.5 per barrel, in a clear indication it would ramp up output in any price scenario.

Gulf producers and Russia have said they would not cut output even if prices fell to $20 per barrel.

On Friday, the International Energy Agency (IEA) said that the global supply glut was likely to deepen next year and put more pressure on prices.

Opec supply is likely to increase by 1 million bpd next year, Morgan Stanley analysts said in a research note on Monday.

“Almost the entirety of added supplies in 2016 will come from Iran, Iraq and Saudi,” it said.

Published in Dawn, December 15th, 2015

Comments (10) Closed

Faisal Bajwa Dec 15, 2015 08:11am

What happened to the peak oil theory?

AXH Dec 15, 2015 08:37am

It is about time that oil prices come down. These people have made billions in profit by jacking up prices over the past many years.

Arif k Dec 15, 2015 09:50am

There is no future for oil as big motor companies are looking forward to electronic cars. Ford motors just announce over 40 billion project for electronic vehicles. Not good sign for oil producing countries.

Optimistic Dec 15, 2015 10:14am

May be some relief to Pakistani consumers - But Pasha is going to ruin our dream - even if crude touch $ 10 per barrel.

Iffi Dec 15, 2015 11:01am

@Optimistic it's dar not pasha!!! Anyways oil would be coming down to US $ 20 atleast and that would be good for consumers in the short run but in the long run it would bring a massive massive recession throughout the world and this has already started. That's a bad bad news for employment and exports especially for developing countries

Shahzad Dec 15, 2015 06:16pm

@Iffi: Why low oil price would bring recession?

Actually, low oil price would bring economical boom and can fuel inflation (lot of money saved from fuel bills would chase goods, hence price of goods getting inflated). Anyhow, persistent long period of low oil price could take many unwary oil companies as well as countries that depends mostly on oil incomes to bankruptcy, especially Saudi Arabia. f period would be long than other oil exporting Arab countries could see their economy shattered. Low oil price could indirectly effect economies of some third world countries, including Pakistan, as many jobs in middle east would go causing return of workers, that would make unemployment in Pakistan increase and remittances reduced.

Akhtar Dec 15, 2015 10:59pm

Good news for the consumer as long as price cuts are passed on.

M.Saeed Dec 16, 2015 12:18am

Jimmy Carter had said in his Sate of Union address of 1977 that, discoveries of oil would peak in mid 80's and world must find alternate and renewable energy for future much before end of the 20th century. George Bush in his pre-election speech of 2000 had promised that, if elected to White House, a child born that year (2000), on reaching his driving age, would be driving a car running on renewable source of energy. But, today, we have a serious oil glut and nowhere any sign of Peaking of Oil!

ROHIT PANDEY Dec 16, 2015 03:12am

I am going to buy a Ford Explorer....and, I dont have to worry about gas prices now!:):):):)

Jhan Dec 16, 2015 07:07am

Good for Government's, not people.