In this June 12, 2014 file photo, a pair of tanker trucks parked next to pumps at an oil-producing well in McKenzie County, North Dakota. An oversupply of oil in the global market has forced prices of US crude to fall below $31 in Asian trade on Jan. 12, 2015. AP
SINGAPORE, Singapore — US crude tumbled below $31 a barrel Tuesday, extending a sell-off that has sent the commodity to more than 12-year lows, hit by a global supply glut, a strong dollar and tepid demand.
US benchmark West Texas Intermediate (WTI) for delivery in February slumped 45 cents, or 1.43 percent, to $30.96 per barrel and Brent tumbled 47 cents, 1.49 percent, to $31.08 at around 0300 GMT.
The last time prices were so low for WTI was in December 2003 and in April 2004 for Brent. WTI touched a low of $29.66 in December 2003 and Brent in April 2004 hit $29.95.
READ: Oil prices sink below $32; lowest in 12 years | Shanghai volatile as China fears persist
Prices plummeted 10 percent last week as investors grow concerned about the global supply glut and weakness in key market Chinese, which is the world’s biggest energy user. Potential geopolitical risks, including the escalating Saudi Arabia-Iran row are also keeping traders on edge.
The rise in the greenback, which makes dollar-priced oil more expensive for holders of weaker currencies, was also a key factor in Tuesday’s price decline, analysts said.
“The drop mainly comes from the increasing dollar strength… That accounts for the bulk of the movement,” Phillip Futures investment analyst Daniel Ang told AFP.
But Ang said he did not think prices would breach the $30 psychological support barrier.
“We may see some bearishness in the short term where prices may continue falling a little bit but I think they will remain highly supported (at $30),” he said.
The market is also bracing for new crude supplies from Iran once Western economic sanctions on the country are lifted under a deal struck last year to curb Tehran’s nuclear program.
This could bring another one million barrels of oil per day on to the already saturated global market within months.
“When you have a supply overhang, there’s going to be continued downward pressure on prices,” Ric Spooner, a chief analyst at CMC Markets in Sydney, told Bloomberg News.
“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.”