Industry

Oil Price Dropped to The Lowest Level in More than a Decade

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January 8
4:05 AM 2016

Oil price is pushed to the lowest price and global financial market continues to slip as stock market is down. Meanwhile,  ongoing and escalating conflict between Saudi and Iran in Middle East bring more uncertainty to oil market.

The oil price is recorded its lowest level for the first time in more than 10 years. On Thursday, according to Reuters, Brent LCOc1 fell more than 5 percent, or about $2 per barrel to the lowest at $32.16. Although it had recovered to $32.87 but the price the the lowest since April 2004. Meanwhile U.S. crude CLc1 fell to a low of $32.10 per barrel, a lowest recorded since late 2003, before bouncing slightly to $32.56.

In the meantime, American oil output, which has surged in recent years, remained relatively strong despite the falling of oil prices.

A day before, data showed a 10.6-million-barrel rise in gasoline supplies in the U.S.. The number is recorded as the biggest weekly build since 1993. Hans van Cleef, senior energy economist at ABN Amro in Amsterdam commented, "Negative sentiment is hurting demand expectations, growth is easing in China and there is a spillover from the inventory build in (U.S.) gasoline stocks from yesterday and this is reflected in prices."

Economic slowdown in China enforced the central bank, People's Bank of China (PBOC) to reduced yuan's fixing by 0.51 percent to 6.5646 on Thursday, the weakest since March 2011. Trading on the Shanghai CSI 300 Index was suspended after it plunged more than 7 percent.

In global stock market, The Guardian reported that London FTSE 100 is closing 64 points lower at 6,073. While New York's Dow Jones industrial average dropping below the 17,000 level in early trading.

Meanwhile, in the oil market, tension between two top oil producing countries, Iran and Saudi Arabia has given more anxiety and uncertainty. On Thursday, a new conflict arise as Iran said that its embassy in Yemen was hit and damaged by a missile attack from Saudi Arabia. This new situation will be impossible for oil producing countries in OPEC to reach agreement on production cut to stabilize the price, because both Saudi and Iran are the members of OPEC as well.

Chief Executive Officer of Statoil ASA, Eldar Saetre told Bloomberg in an interview in Oslo, "Most people are probably surprised that oil prices would go to this level." said the Norwegian oil company chief. "It could go even lower, and it just underlines the uncertainty."

Oil price will seem to go lower below $30 as geopolitical tension between Iran and Saudi Arabia escalating. While economic slowdown in China and the weakening Yuan put more bleak prospect on global economy outlook in 2016.

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