Oil’s fall below $60 a barrel to five-and-a-half year lows gathered pace on Tuesday after data showed Chinese factory activity had weakened.
ICE January Brent – the international oil benchmark – dropped $1.45 to $59.61 a barrel in afternoon trading, after falling as low as $58.50 a barrel. This is almost half the level it reached in mid-June.
China’s manufacturing sector shrank for the first time in seven months in December, according to figures released on Tuesday, adding to a series of data releases pointing to slowing economic growth in the world’s largest oil importer.
"Manufacturing activity looks to have continued to cool in recent weeks in spite of last month's rate cut," said analysts at Capital Economics.
Emergency step
The midnight decision by Russia’s central bank to raise its key interest rate from 10.5 per cent to 17 per cent, in an emergency step to stem the collapse in the rouble, spurred a sell-off in currencies of countries that heavily rely on commodity exports to fill government coffers.
The oil price slide from $115 a barrel six months ago has come amid relentless US shale oil production and output from Opec countries that has exceeded targets, coinciding with a gloomy economic outlook for Europe as well as China. Opec's decision last month to stick to its 30m barrels a day output target, despite poorer members of the group calling for cuts to production to prop up prices, has worsened the rout.
Comments by Suhail Al-Mazrouei, the energy minister for the UAE, late on Monday reinforced the message that the cartel would not change its stance.
“It’s not logical nor fair to ask Opec to reduce their production and not ask the other producers to stop their expected growth in supply!!” Mr Mazrouei said on Twitter.
He told reporters there was no need for an emergency Opec meeting, which added further downward pressure on prices.
“We are not targeting a specific oil price, we are targeting market stability, this is not a competition or war, rather a simple market rule,” he added.
US oil prices also faced pressure before turning positive in afternoon trading. Nymex January West Texas Intermediate rose 83 cents to $56.74 a barrel. The US marker had dropped to $53.80 a barrel, as traders continued to digest comments from analysts that pointed to resilient shale oil production, at least in the short-term. WTI last traded below $55 a barrel in May 2009.
"In recent months applications for North Dakota drilling permits have remained high and rig counts have dropped only slightly," said analysts at JBC Energy.
“As there are still a substantial number of wells waiting to be completed, we expect that the lower activity will cause slower growth more towards the second half of 2015.”
– 2014 The Financial Times Limited
