Oil prices sink to 7-year lows


Global oil prices tanked on Friday close to seven-year lows on oversupply woes, sparking a fresh wave of selling on European and US stock markets as panicked investors fled the energy sector.

Crude, which has slumped since OPEC left its oil output at a record high level last week, took another tumble after the International Energy Agency (IEA) said oversupply would persist until late 2016.
In response, Brent crude futures for January delivery collapsed to $38.90 per barrel — a level last seen on December 31, 2008, during the global financial crisis.
US benchmark West Texas Intermediate (WTI) for delivery in January dived to $36.12 ‚ last witnessed in February 2009.
“Comments from the IEA have … seen both WTI and Brent fall aggressively, after they (indicated) that the unrelenting supply would see oil prices lower into the new year,” said analyst James Hughes at trading firm GKFX.
Traders were also positioning themselves before the weekend and next Wednesday’s expected interest rate hike, the first in nine years, from the US Federal Reserve.
The prospect of higher rates boosts the greenback, which in turn makes dollar-priced crude more expensive for buyers using weaker currencies. That tends to weigh on oil demand and pull prices lower.
“Oil prices have fallen heavily again this morning as the commodity rout continues to dominate the week,” Hughes said.
“Prices have tumbled yet again as many investors try and position themselves ahead of the weekend, and also next week’s key Fed decision.”
Oil has collapsed by more than 10 percent since the 13-nation Organization of the Petroleum Exporting Countries decided against cutting output despite plunging prices, weak global demand and the stubborn supply glut.
That has sent shockwaves across world equity markets because low oil prices slash profits for energy majors like BP, Total and Royal Dutch Shell.
In mid-afternoon trading, major European markets saw early losses deepen with the London FTSE 100 index shedding 1.8 percent to drop below the 6,000 mark, while Frankfurt and Paris lost 2.2 percent in value.
BP’s share price slid 3.2 percent to 339.80 pence and Shell’s ‘B’ shares dropped 4 percent to 1,498 pence and Anglo American shed 7 percent in a London session which saw just two FTSE 100 firms in positive territory.
French giant Total saw its stock sink 3 percent.
US stocks opened more than one percent lower, with investors selling down industrial heavyweights Dow Chemical and DuPont after they confirmed plans to merge.
Ten minutes into trade, the Dow Jones Industrial Average was off 1.26 percent with the broad-based S&P 500 and the tech-rich Nasdaq Composite Index similarly heading south.
Dow Chemical and DuPont both gave up about half the sharp gains that came Wednesday on leaked news of their mega-merger, losing 3.9 percent and 5.8 percent respectively.
Most Asian markets also sank at the end of a painful week for global equities defined by a commodities rout which analysts expect to continue.
With the global economy struggling, China’s growth subdued and the dollar tipped to strengthen further, oil is expected to remain beaten down until possibly 2017.
Shares in Hong Kong sank 1.1 percent — a seventh-successive loss — with CNOOC and PetroChina leading energy firms lower.
On other markets Shanghai slipped 0.9 percent, but bargain-buying and a weaker yen helped Tokyo rally.


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