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 Brent slipped below $39 per barrel for the first time since December
2008 as the IEA, which advises developed nations on energy, warned
that demand growth was starting to slow.
"The technicals and the fundamentals are singing from the same hymn
sheet," said Tamas Varga, oil analyst with PVM Associates. "We will
not see support until we hit the lows of 2008."
Brent crude futures were down 60 cents at $39.13 a barrel at 5.58
a.m ET, bouncing slightly from a session low of $38.90.
West Texas Intermediate (WTI) U.S. crude futures were at $36.26 per
barrel, down 50 cents after touching $36.12, their lowest since
February 2009.
Varga said there was room to fall further, with little support
likely until oil reached the 2008 lows of $36.20 per barrel for
Brent and $32.40 per barrel for WTI.
Prices have tumbled this month after OPEC failed to impose a ceiling
on output. OPEC producers pumped more oil in November than in any
month since late 2008, some 31.7 million barrels per day.
"Consumption is likely to have peaked in the third quarter and
demand growth is expected to slow to a still-healthy 1.2 million bpd
in 2016, as support from sharply falling oil prices begins to fade,"
the IEA said in its monthly report.
Should sanctions on Iran be lifted, its exports could rise, adding
to the market's oversupply.
"The next quarter is going to be particularly tough as we go from a
high-demand to a low-demand quarter," said Richard Gorry, director
of consultancy JBC Energy Asia.
"Can you rule out $20 per barrel? No, you can't," he said, although
adding that prices would not likely fall that far.
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Still, the IEA said the pace of stock-building should roughly halve
next year and that it was very unlikely that global storage capacity
would be filled.
"Concerns about reaching storage capacity limits appear to be
overblown," it said. The IEA said it expects a decline in non-OPEC
production in 2016, as U.S. light tight oil shifts into contraction,
and it that further spending cuts could spur deeper output declines.
"There is evidence the Saudi-led strategy is starting to work," the
IEA said, referring to the producer group's decision to maintain
high output to safeguard market share.
U.S. shale oil production, the main driver of non-OPEC supply
growth, is expected to fall for a ninth consecutive month in
January, a forecast from the U.S. Energy Information Administration
showed this week.
(Additional reporting by Roslan Khasawneh and Henning Gloystein;
editing by Jason Neely)
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