WTI and brent crude both fell to multi-year lows on Wednesday near $ 34 a barrel Investing.com — Crude futures fell sharply on Wednesday plunging to fresh multi-year lows, as rising tensions between Saudi Arabia and Iran provided further indications that the two Persian Gulf oil powers may be unwilling to engage in any diplomatic efforts to cut near-record oversupply on global markets.
On the New York Mercantile Exchange, WTI crude for February delivery traded in a broad range between $ 33.78 and $ 36.35 a barrel before settling at $ 33.97, down 2.00 or 5.56% on the session. With the considerable losses, futures fell to its lowest level in seven years since the height of the Financial Crisis. WTI crude has dipped more than 8% over the last three sessions since a wave of protesters stormed the Saudi embassy in Tehran over the weekend in response to the and 46 others by the kingdom on Saturday.
On the Intercontinental Exchange (ICE), brent crude for February delivery wavered between $ 34.19 and $ 36.68 a barrel, before closing at $ 34.19, down 2.23 or 6.11% on the trading day. After reaching near-three week highs on Monday, North Sea brent futures plummeted to its lowest level in 11 years at Wednesday’s session lows. Over the last month of trading, the front month contract for brent has plummeted more than 20% since by leaving its output quota unchanged at a closely-watched meeting.
The international and U.S. domestic benchmarks of crude are coming a dreary year when each tumbled by more than 30%, amid record-high output among the world’s top producers.
The diplomatic crisis between Saudi Arabia and Iran, two of the world’s largest oil producers, intensified on Wednesday despite efforts from leaders on both sides to mollify an escalating conflict with the potential for creating long-term ramifications on crude prices. At a press conference in Tehran, Iran foreign minister Mohammad Javad Zarif criticized the Saudi kingdom for restraining Iranian economic growth by keeping oil prices low. Iran is set to release 500,000 barrels per day of oil ready for export when economic sanctions are eased this year and an additional 500,000 barrels shortly thereafter.
Elsewhere, investors digested a massive draw of 5.1 million barrels in for the week ending on January 1, significantly below forecasts for a build of 500,000 bpd. At 482.3 million barrels, U.S. crude oil inventories remain near levels not seen for this time of year in at least the last 80 years. While a considerable draw has generally provided upside pressure for crude prices in recent months, inventories are typically drawn down in the final weeks of the year as companies look to avoid year-end tax burdens.
Within the report, motor gasoline inventories surged by 10.6 million barrels last week, its high weekly rise since 1993, according to the EIA. At one point on Wednesday, plunged by as much as 7%. U.S. crude production, meanwhile, increased to 9.22 million barrels for the week, the highest level since August.
Major increases in production are viewed as bearish for crude, which has plunged more than 70% since reaching $ 115 a barrel in June, 2014, as supply continues to greatly outpace demand. Reports of slowing economic growth in India and China, one of the world’s largest consumers of oil, also exacerbated worries of weakening demand in Asia. In December, China’s index fell to a 17-month low at 50.2, its second-lowest level on record.
The , which measures the strength of the greenback versus a basket of six other major currencies, was relatively flat in U.S. afternoon trading at 99.40, down 0.07% on the day. The index is on pace to halt a six-day winning streak.
Dollar-denominated commodities such as crude become more expensive for foreign purchasers when the dollar appreciates.
U.S. crude plunges 5% to 7-year low amid escalating Center East battle
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