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Oil slides further to lowest since 2009
Brent crude, the international benchmark for oil, fell 0.9 per cent early Monday to $37.60 a barrel. West Texas Intermediate, the US benchmark, dropped 0.7 per cent to $35.39, a new low since February 2009.
Crude-oil futures have been facing severe headwinds since last year, when prices for the U.S. and global benchmarks shed more than half their value from the highs seen in June 2014. The commodity has already lost a third of its value in 2015, staging what seems like a relentless drop toward multiyear lows.
The Organization of the Petroleum Exporting Countries (OPEC) is one reason for oil’s most recent downturn. But strength in the U.S. dollar, resilient U.S. production and a continuing global supply glut are also among the key reasons why oil prices continue to fall.
Prices have fallen every day since the cartel on Friday decided to continue pumping oil at its current output level, which essentially legitimizes production of roughly 31.5 million barrels a day, which was running above OPEC output ceiling of 30 million barrels a day.
The International Energy Agency said that the world’s stockpile of oil sits at a record 3 billion barrels and it has been growing.
A rise in the U.S. dollar and expectations for further strength as the Federal Reserve meeting approaches also have played their part in oil’s drop.
Commodities priced in dollars often trade inversely with the dollar, as moves in the U.S. unit can influence the attractiveness of those commodities to holders of other currencies.
Year to date, the ICE U.S. Dollar Index has gained by more than 8%, while WTI oil prices are set for a loss of more than 30%. Given an impending U.S. interest rate hike this week, a stronger dollar seems to provide further headwinds to crude oil.
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