Free Commodity Tips - The Rout in crude oil prices deepened on Monday with prices sinking nearly 6 per cent in the domestic market and plummeting to the lowest level in over six and a half years in the overseas market as the OPEC effectively ditched its strategy of curbing production to control prices, threatening to worsen a global supply glut.
The cartel, which makes up about 40 per cent of global crude supplies, abandoned its 30 million barrels per day daily quota, a target which its members have breached over the past one and a half years.
Friday’s decision means that the OPEC has given its member nations a license to produce oil as much as they want in a bid to protect market share amidst the rising threat from US and Russian producers. The OPEC’s verdict to continue to maintain production at very high levels could push international crude prices, which have fallen below the USD 40 per barrel mark, to USD 20 per barrel, analysts fear.
Speculation that US storage levels expanded for an eleventh straight week also signaled concerns of oversupplies. Weaker gains in a US labour market gauge signaled a cooling recovery in the world’s biggest economy, clouding the demand outlook for the fuel. The US Labour Market Conditions Index came in at 0.5 in November, compared to a revised 2.2 in October, with a reading above 0 signaling expansion. Oil may extend a decline today as a fifth straight drop in China’s exports raised fears of a hard landing in the world’s second biggest economy.
At the MCX, Crude oil futures, for the December 2015 contract, closed at Rs 2,529 per barrel, down by 5.8 per cent, after opening at 2,652, against the previous close price of Rs 2,684. It touched an intraday low of Rs 2,523.
