LONDON: Brent crude oil steadied above US$73 a barrel yesterday after hitting a fresh four-year low in the wake of OPEC's decision not to cut output, a move investors said would leave oil markets heavily oversupplied.
Saudi Arabia blocked calls on Thursday from poorer members of the Organization of the Petroleum Exporting Countries for output reductions, triggering a rout in oil markets that sent Brent down more than US$5 a barrel.
“We are seeing continued oversupply,” said Bill Hubard, chief economist at Markets.com.
“I think US$70 a barrel will be the new norm. We could see oil go considerably lower.”
The sell-off continued in early trade on Friday with Brent reaching a low of US$71.12, its weakest since July 2010. By 1455GMT, Brent had recovered ground to trade around US$73.10, up 52 cents.
US crude oil fell to a four-and-a-half-year low of US$67.75 a barrel in electronic trade on Thursday, while US financial markets were closed for Thanksgiving, down almost US$6 from Wednesday close at US$73.69.
On Friday, it rallied a little and was around US$69.20 by 1455GMT.
“Welcome to the new world of oil,” said Michael Wittner, senior oil analyst at French bank Societe Generale.
“Saudi Arabia and Opec will no longer be the mechanism to balance the market, they have relinquished that role.”
“Instead, the market itself — prices, in other words — will be the mechanism to rebalance the market. We cannot overstate what a dramatic and fundamental change this is for the oil market,” he added. Reuters