Sectors

Oil Price Crash to $30, The Lowest in 12 Years

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January 12
7:42 PM 2016

Oil price hit the lowest price in 12 years, as the continuing supply glut will continue to push down the price. Meanwhile, financial market is steady and made gain as China stock market is stabilizing.

On Tuesday trading, according to Reuters, Brent crude fell to a low of $30.43 per barrel, a level last seen in April 2004, before recovering to $31.43. While U.S. crude West Texas Intermediate (WTI) fell to a low of $30.41 per barrel, a level last seen in December 2003, before crawling back to $31.06

Since the beginning of 2016, the price have been down 16 percent. Many factors contributed to drag the price lower, from China's weakening economy, strong dollar and geopolitical tension in Middle East. Head analyst of London Capital Group, Brenda Kelly said, "The bearish sentiment surrounding the commodity has intensified."

Rising U.S. oil stockpile to nearly 2 million barrel as last week report from Energy Information Administration (EIA) also aggravating the price even more. Bjarne Schieldrop, chief commodities analyst at SEB AB told Bloomberg, ""Oil inventories are going to be sky-high." In regard to oversupply, he added, "The price is trying to move down to balance the market, to move supply in line with demand, and it's struggling to do it. U.S. production is not falling fast enough."

The overproduction will not stop, as Iran will soon flood the market following lifted sanction. Chief analyst of Sydney-based CMC Markets Ric Spooner said, "Investors are looking toward a difficult few months for oil, especially with Iran set to boost exports. We are likely to see production cuts at these prices, but they may take some months to come through."

Despite effort by OPEC members to control production and coordinate with no-OPEC member, but the effort seem futile as Iran started to increase its oil output. Iran is focusing on West Karoun region from three oil fields in Yadavaran, South Azadegan and North Azadegan..

Nevertheless, turmoil in oil price does not impact financial and currency market much. Wall Street Journal reported, as China stock market is stabilizing, the global stock market starts to gain. S&P 500 Futures is up 0.5% at the opening trade while The Stoxx Europe 600 was up 1% and Germany DAX rise 2.1%.

In China, Shanghai Composite Index remains steady for third straight session and gaining 0.2%. While Japan Nikkei Stock Average is still haunted by fears about China making it dropped 2.7%. Australia S&P/ASX 200 also fell 0.1%.

Stronger dollar affected currency market heavily, as yen weakened 0.1% against the dollar at ¥117.7680 and the euro was down 0.1% against the dollar at $1.0855. Report about declining U.K. industrial production in November made British pound fell 0.4% against the dollar to $1.4487.

Although financial market started to recover from last week losses, but oil price continue to slide. Supply glut will keep pushing the price down the as the oil output continue to increase.

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