19th December 2014
Thursday witnessed a further slump in global crude oil as traders betted that a six-month rout would resume on worries of oversupply.
US crude and Brent crude both fell by $2 a barrel after initially extending Wednesday's short-covering, which lifted prices by $3, Reuters reports.
Traders were braced for more selling as US crude dipped below $55 a barrel and Brent sank below the psychologically key level of $60.
"We're continuing to search for a bottom and might even see another significant drop before the year-end," said Gene McGillian, an analyst at Tradition Energy in Stamford, Connecticut.
Some traders attributed the selling to position squaring ahead of Friday's expiry of the January front-month contract CLF05 in US crude.
Others made reference to a Bloomberg report about a Nigerian port workers union suspending a strike, although workers in that dock union were not involved in oil ports.
US crude's front-month contract CLc1 settled down $2.36 at $54.11, having declined to $54.05 earlier. On the previous day, it rose to $58.98.
Meanwhile, Brent's front-month contract LCOc1 closed down $1.91 at $59.27 a barrel, after reaching a session low at $59.17.
According to one broker, Brent needs to rally and hold well above $61 a barrel "to have any decent strength technically".
Plummeting prices are beginning to take their toll on the industry. Robin Allan, chairman of the independent explorers' association Brindex, said the North Sea industry was being pushed to the brink of collapse.
Oil companies have begun cutting jobs and wages, while investment in new projects is unlikely if prices remain at low levels.
Mr Allan said: "The industry adapts, but the adaptation is one of slashing people, slashing projects and reducing costs wherever possible, and that's painful for our staff, painful for companies and painful for the country."
The near-50 per cent drop in oil prices began six months ago, triggered by fast-growing US shale oil supplies. It accelerated after OPEC's decided not to curb output in November.
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