SINGAPORE (Reuters) – Oil prices fell on Tuesday, with Brent mired near a 5-1/2 year low close to $60 per barrel, as Chinese factory activity slowed and concerns rose over the health of emerging market economies and their currencies.
Oil prices have almost halved since June amid rising output and cooling demand, but producer club OPEC has so far resisted calls to cut production to shore up prices.
Data showing activity in China’s factory sector shrank for the first time in seven months in December, adding to a slew of reports showing more fatigue in the world’s No.2 economy, further dragged on oil prices.
Brent for January delivery <LCOc1> was at $60.81 a barrel at 0420 GMT (11:20 p.m. EST), down 25 cents and close to the 5-1/2-year low of $60.20 hit on Monday.
U.S. crude for January delivery <CLc1> was at 55.58 a barrel, down 33 cents, off a low of $55.02 reached on Monday – the weakest since May 2009.
“The oil market is experiencing a cost re-basement which makes determining when the market is oversold extremely difficult,” U.S. bank Goldman Sachs said.
“For the market to be oversold, it requires prices to be far below costs, (which) are falling nearly as fast as the price, which means oil producers can spend less to get the same or potentially even more in terms of production,” it added.
Analysts said that weakening emerging market economies and their currencies were also weighing on oil prices.
In Russia, the central bank raised its key interest rate to 17 percent from 10.5 percent early Tuesday in an emergency move to halt a collapse in the rouble, triggering sell-offs in other currencies where the economies rely on commodity exports.
“Further, the sharp decline in nearly all commodity prices and the weakening in commodity currencies creates headwinds for oil demand in the commodity producing emerging markets in Latin America and the Middle East. Historically these regions didn’t contribute much to oil demand, today they do,” Goldman Sachs said.
(Editing by Himani Sarkar) Copyright (2014) Thomson Reuters. Click for restrictions.