The price of benchmark North Sea Brent slipped below $37-barrel today, teetering on levels last seen more than 10 years ago amid market expectations that the global glut will continue in the New Year.
With the FTSE-100 closing 1.3% down, both BP and Shell out-raced the main market on the way down with their shares falling 2.6% and 2.4% respectively.
Amid growing fears that the global oil glut would worsen in the months to come in a pricing war between leading OPEC and non-OPEC producers, Brent crude dropped to below $36.40 a barrel for the first time since December 2008 and just a few cents off an 11 year low of $36.20-barrel in 2004, before recovering slightly.
OPEC has been pumping near record levels since last year in an attempt to drive higher-cost producers such as US shale firms out of the market.
New supply is likely to hit the market early next year as OPEC member Iran ramps up production once sanctions are lifted, as expected following the July agreement on its disputed nuclear programme.
Iranian news agency Shana quoted the manager director of Iran’s Central Oil Fields Company as saying Iran’s cost of production stood $1-$1.5 per barrel in a clear indication it would increase output in any price scenario.
Some Gulf producers and Russia have said they would not cut output even if prices fell to $20-barrel.
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