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Oil down 3 percent; Brent near 11-year low as oversupply worries return
December 28, 2015 / 12:43 AM / 2 years ago

Oil down 3 percent; Brent near 11-year low as oversupply worries return

An offshore oil platform is seen at the Bouri Oil Field off the coast of Libya August 3, 2015. REUTERS/Darrin Zammit Lupi

NEW YORK (Reuters) - Oil fell more than 3 percent on Monday, with global benchmark Brent back near 11-year lows as last week’s short-covering dried up and players worried that crude prices had more room to swoon in the new year.

U.S. gasoline futures slid more than 2 percent as the selloff extended to refined oil products. Heating oil fell 1 percent as expectations of cold weather limited its downside amid a 10 percent rally in natural gas, another heating fuel. [NGA/]

Crude futures slumped in Asian trading as Japanese data showed a 46-year low in oil sales in the world’s fourth largest crude buyer. They slid more in the New York session, as some traders reckoned the two-day pre-Christmas rebound, where crude rose about $2 a barrel, had been overdone.

“Volume isn’t great, which is typical for this time of year, and most guys are either flat on their books and positioning themselves for a weaker first quarter in 2016,” said Tariq Zahir, an oil bear at Tyche Capital Advisors in Long Island, New York.

Brent settled down $1.27 at $36.62 a barrel, after falling to a session low of $36.52. It hit $35.98 on Tuesday, its lowest since 2004.

Brent also settled below U.S. crude’s West Texas Intermediate (WTI) futures for a fourth straight day, showing its waning influence over WTI after this month’s decision by the United States to lift a 40-year ban on U.S. crude exports.

WTI finished the session down $1.29 at $36.81, after an intraday low at $36.66.

Oil bears are looking to beat WTI’s previous low of $32.40 in December 2008.

“A bearish stance still appears warranted and we continue to view a decline to the $32.50 area,” said Jim Ritterbusch at Chicago-based oil markets consultancy Ritterbusch & Associates.

Figures from the Organization of the Petroleum Exporting Countries imply an oil glut of more than 2 million barrels per day, equal to more than 2 percent of world demand.

Crude prices have plunged nearly 70 percent from highs above $100 a barrel in June 2014 after OPEC, led by top exporter Saudi Arabia, dropped its longstanding policy of cutting output to support prices in favor of defending market share.

While the collapse has partly achieved OPEC’s goals by curbing growth of competing supplies, it has also put the finances of oil producers under strain.

Riyadh plans spending cuts and non-oil revenue raising methods to manage a record state budget deficit while state-owned oil firm Saudi Aramco pumps away.

Additional reporting by Alex Lawler in London; Editing by Bill Trott, David Gregorio and Diane Craft

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