The price of oil continued to decline on Monday, with global benchmark Brent crude reaching levels not seen since 2004 amid growing concerns about a dramatic oversupply in the world market.
Brent crude for February delivery fell to a daily low of $36.05 a barrel, its weakest level on ICE Futures Europe since July 2004. It would subsequently settle at $36.50 a barrel, declining 38 cents or 1%.
Monday’s retreat deepened Brent’s losses to a staggering 20% over the past four weeks. The selloff intensified in December after the Organization of the Petroleum Exporting Countries (OPEC) kept its production policy unchanged in an effort to retain market share. The losses have been exacerbated by surging US crude inventories.
The price of West Texas Intermediate (WTI) crude briefly touched below $34 a barrel, its lowest level since the global financial recession of 2008. The WTI contract settled down 31 cents or 0.9% at $34.42 a barrel on the New York Mercantile Exchange. WTI futures have now dropped 18% over the past four weeks.
The oil price collapse has shaved more than 22% off US energy shares over the past 12 months, with major oil companies reporting deep spending cuts and layoffs. The S&P 500’s energy component has been by far the biggest loser of 2015. Six of the S&P 500’s ten major components have reported declines in 2015.
US stocks were trading in positive territory after the opening bell on Monday, with the Dow Jones Industrial Average adding 0.2%. The S&P 500 Index was also up 0.5%.
Gains on Wall Street followed a mixed session in Europe. The pan-European STOXX 600 Index reported a 0.2% drop on Monday. Major averages in London and Frankfurt reported modest gains.
Plunging oil prices weighed heavily on the global stock markets at the end of last week, with the Dow Jones on Friday posting its biggest one-day drop since September 1. With Brent crude hovering near 11-year lows, the markets may experience renewed volatility ahead of Christmas.
Meanwhile, the US Energy Information Administration (EIA) will release its weekly inventory report on Wednesday. Crude stockpiles rose by nearly 5 million barrels in the week ended December 11, EIA data revealed last week.
Separately, the Commerce Department will report on November durable goods orders, a key proxy for the US manufacturing sector. Durable goods orders are forecast to decline 0.7% in November.