Oil prices breached the $40 a barrel mark on Tuesday with internationally traded Brent crude dropping 80 cents to $39.94 a barrel in afternoon trading.
The US benchmark, West Texas Intermediate, declined 91 cents to $36.74 a barrel. Both markers fell to the lowest since February 2009, writes oil and gas correspondent Anjli Raval.
Traders are digesting Friday’s Opec decision to maintain production in the face of lower oil prices after they failed to agree on who should bear the brunt of output cuts.
“Unchanged OPEC policy and the priority of re-gaining a bigger slice of the global oil supply cake is, in fact, bearish and spoils Christmas for oil investors,” said Tamas Varga at London based broker PVM.
“It will be interesting to see how oil price forecasters will adjust their price estimates in the light of the recent developments.”
Traders are increasingly bearish on oil prices and this is reflected in their short positions.
The ‘lower for longer’ mantra has become embedded in the oil industry lexicon with observers struggling to find reasons to have a positive view on the oil price in the near term.
“Money managers holding a record short position in the futures market have so far seen no reason to scale back positions,” Ole Hansen at Saxo Bank. “Until there’s a change in the outlook, which looks horrible, the upside potential seems limited.”
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