Oil declines to new 11-year low as production continues to rise

Brent crude prices fell to its lowest level in eleven years on Monday, surpassing lows reached in the depths of the financial crisis, hit hard by a rise in global production that looks set to continue in 2016.

Even though demand has been steady this year, crude inventories have continued to rise at a rate of 1 million barrels a day.

Oil stocks in the developed world have ballooned to almost 3bn barrels — or more than a month of global oil supplies, according to the International Energy Agency.

They are expected to keep rising in 2016 with higher exports expected from Iran, once OPEC’s second-largest producer, when sanctions linked to its nuclear programme are lifted. At the same time demand growth is likely to slow from this year’s fevered pace.

Brent, the international oil marker, fell by as much as 2 per cent to $36.04 per barrel on Monday, its weakest since 2004 and below the financial crisis low of $36.20 reached on December 24 2008. It settled at $36.35, down 1.4 per cent.

Meanwhile, on the other side of the Atlantic, West Texas Intermediate, the US oil benchmark, settled up one penny at $34.74 a barrel, still more than $2 above its 2008 intraday low.

The number of put options giving holders the right to sell WTI crude below $30 a barrel by June has risen by almost half this month to the equivalent of 12m barrels. Traders also hold about 4m barrels equivalent of puts to sell WTI below $20 by June.

On Tuesday in Asia oil prices ticked higher after a pledge by Chinese economic planners of more “proactive” and “flexible” growth policies, with Brent adding 0.2 per cent to $36.43 a barrel and WTI climbing 3.8 per cent to $36.06.

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