Crude oil prices hit new multi-year lows in Asia

Crude oil prices fell to fresh multi-year lows in Asian trade today, with analysts blaming concerns about a supply glut and the effects of weaker demand from Europe and China.

US benchmark West Texas Intermediate (WTI) for November delivery was down 65 cents at a two-year-low of $85.09 in late-morning trade and Brent crude retreated 74 cents to $88.15, its lowest since mid-2010.

Both contracts are down about a fifth from their 2014 highs touched in June.

Brent crude fell to just above $88 a barrel on Tuesday in a well-supplied market as expectations faded that OPEC could cut output and shore up prices.

The global oil benchmark has declined more than 20 per cent from the 2014 high in June as supplies rose and demand slowed in the United States, Europe and China.

Investors expecting a production cut from OPEC to support prices were disappointed as Saudi Arabia and Kuwait played down the possibility of the Organization of the Petroleum Exporting Countries reducing the output.

OPEC, which produces about 40 per cent of the world’s crude oil, is due to meet in late November to discuss the output targets.

“There’s been market chatter that Saudi Arabia is unlikely to cut production in the November meeting so that’s probably playing on the market,’’ said Ankit Pahuja, a commodity strategist at ANZ in Melbourne.

“Seasonally, it’s a weak point. We think there’s more scope for recovery in November and December.’’

Brent crude fell 72 cents a barrel to $88.17 by 0342 GMT a barrel after touching the lowest since December 2010 on Monday. The November contract expires on Thursday.

US crude dropped 69 cents a barrel to $85.05 after it pared Monday’s sharp intra-day losses to settle down 8 cents.

“There was probably some positivity that came out of the China data yesterday,’’ Pahuja said. Underlying oil demand in the world’s top energy consumer was still “quite strong’’, he said.

China posted a strong rebound in commodities imports in September, including a 13 per cent rise in crude oil imports from August.

Despite the recent price slump, several analysts expect oil markets to recover ahead of peak seasonal winter demand in the Northern Hemisphere.

“We see the potential for a positive bounce into year-end, particularly given extremely bearish sentiment and positioning,’’ Morgan Stanley analysts said in a note.

“Even if OPEC is not overly responsive before year-end, which we expect, fundamentals have turned, which should eventually lift crude prices.’’

Investors are looking ahead to weekly oil inventories data from the United States for price direction.

Analysts said markets were becoming saturated owing to a rise in US shale gas production and a return of Libyan oil into the market.

Prices were further rattled after the Organisation of Petroleum Exporting Countries (OPEC) signalled it has no intention of cutting output.

Kuwaiti Oil Minister Ali al-Omair had said on Sunday that he expects falling prices to recover during the northern hemisphere winter — but OPEC was unlikely to counter the slide in the short term.

“This slump is partly a reflection of weak demand from Europe and China, but it is mainly due to booming supply and has been compounded by dollar strength and panic selling,” research house Capital Economics said in a note.

“As such, the collapse in oil prices overstates the weakness of the world economy. And whatever the reasons for the fall, lower energy costs should actually help to kick-start global growth,” it added.

Energy research group Douglas-Westwood said investors will be watching an upcoming OPEC meeting in November.

“Will the group act in a disciplined manner and restrict output to support the benchmark price? Or will the members be driven purely by the desire to deliver as much volume to the market as possible?” it said in a note.

It added that “early signs are not good” after Saudi Arabia this month announced a large price cut, sparking fears of a price war among producers.

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