Brent crude has dropped to its lowest level in more than a decade, surpassing the lows hit at the depths of the financial crisis, as the market groans under the weight of over-abundant supply.
The international oil marker dipped 2 per cent to $36.17 a barrel overnight, its lowest level since 2004 and below the $36.20 reached on Christmas Eve in 2008.
West Texas Intermediate, the US oil benchmark, was down 1 per cent to $34.37, but still above its financial crisis low of $32.40 hit almost seven years ago.
Oil prices have dropped more than 15 per cent since a rancorous Opec meeting earlier this month that exposed the organisation’s inability to tackle a global oil glut, which is growing by as much as 2m barrels a day, according to some estimates.
Saudi Arabia and Iran both resisted calls for production restraint and vowed to keep pumping, intensifying a battle for market share that has contributed to record oil inventories and a halving of the oil price over the past 18 months.
Data released by the US Energy Information Administration last week showed crude stockpiles across the country increased by 4.8m barrels to 491m barrels.
“The unexpected surge in stocks is a worry considering inventories typically fall at this time of year,” said ANZ.
An increase in US interest rates and a strengthening dollar have heaped further pressure on oil. Last week’s deal to lift the tight restrictions on US crude oil exports, which have been in place for 40 years, has been another headwind.
“The imbalance in the global oil market has been diminishing in the second half of 2015 but the hope for a rebalancing in 2016 continues to suffer serious setbacks,” said Adam Longson, analyst at Morgan Stanley, listing several impediments to an oil price recovery.
Higher Opec production, including additional barrels from Iran, is one of the main risks for next year, according to Mr Longson. Higher-than-expected US production is another. In spite of the weakening oil price the US oil rig count increased by 17 to 541 last week, putting an end to a month of declines.
“Demand growth is likely to slow from its torrid pace in 2015,” Mr Longson added.
An unusually mild start to the winter in the northern hemisphere, partly because of the El Niño weather phenomenon, is denting demand for products such as heating oil.
Oil has fallen almost 70 per cent since a June 2014 peak of $115 a barrel.