Oil Drops to Near $59 for First Time Since 2009

Oil Drops to Near $59  for First Time Since 2009Oil Drops to Near $59  for First Time Since 2009

Oil fell to close to $59 a barrel for the first time since May 2009 on Tuesday, extending a six-month selloff as slowing Chinese factory activity and weakening emerging-market currencies added to concerns about demand.

International benchmark Brent crude has almost halved since reaching a 2014 high of $115 a barrel in June on ample supply and slowing demand, and a switch in strategy by exporter group OPEC to defending market share rather than prices, Reuters reported.

A report showing Chinese industrial activity shrank for the first time in seven months in December added to concern about oil demand. China is the second-largest oil consumer after the United States.

Brent crude fell as low as $59.02, its weakest since May 2009, and US crude was down $1.25 at $54.66 a barrel.

The Organization of the Petroleum Exporting Countries declined to cut production at a Nov. 27 meeting and, despite slumping prices, major Persian Gulf OPEC members have since shown no sign of reversing course, seeing no need for an emergency OPEC meeting.

Russia’s energy minister also said on Tuesday his country will not cut production. Before OPEC’s meeting Russia, not an OPEC member, had hinted it could cut supply if OPEC did the same.

Weakening emerging-market currencies and economies - the drivers of growth in global oil demand - also weighed on prices, analysts said.

In Russia, one of the world’s largest oil producers, the central bank hiked its key interest rate by 6.5 percentage points to 17 percent on Tuesday in an attempt to halt a collapse in the rouble.

“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,” Goldman Sachs said in a report.