NEW YORK, Dec. 8 (UPI) — Weak performance Tuesday for Chinese energy stocks highlighted the duration of the market headache brought on by OPEC as crude oil prices move to historic lows.
China’s benchmark Shanghai Composite Index closed down 1.9 percent in Tuesday trading as energy companies lost value in a weakened oil economy. Oil companies PetroChina and Sinopec lost more than 2 percent and the broader petroleum index, covering more than two dozen energy companies, shed 3 percent of its value.
China’s slowing economy added downward pressure to crude oil prices in mid-2015. Nevertheless, Saudi Arabia, the de facto leader of the Organization of Petroleum Exporting Countries, said oil production needed to remain robust to meet demand expectations from Asian economies.
Crude oil prices have been in a free fall since Friday, when OPEC ministers left their regular meeting in Vienna with little in the way of a concrete agreement on production.
West Texas Intermediate, the U.S. benchmark price for crude oil, was down 2.7 percent in early Tuesday trading to $36.84 per barrel. For the first time since Feb. 2009, Brent crude oil moved below the $40 mark, losing 2 percent to sell for $39.90 per barrel.
Brent crude oil prices are off just over 7 percent since the conclusion of OPEC’s meeting in Vienna last week.
Higher production coupled with weak demand in a cool economic landscape is keeping crude oil prices lower. Analysis from a Texas petroleum alliance finds that, even though output peaked in mid-2015, it’s still higher than in previous years.
A briefing published by the World Bank before the start of OPEC’s meeting in Vienna said higher production from the United States and the expected rebound in Iranian output suggests oil prices could recover to only $60 per barrel by 2019.
Analysis group Wood Mackenzie said it will be a “long slog” until the middle of 2016 when some balance could return to the market.
“U.S. oil output is slipping into a year-on-year decline late this year and that could provide somewhat of a floor for oil prices as the market contends with the ongoing oversupply,” it said in an emailed statement.
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