Business

LONDON (APP) – Oil plunged to fresh 12-year lows under $28 on Wednesday, slammed by gloomy economic forecasts, China’s slowdown and abundant crude supplies.

In morning deals, US benchmark West Texas Intermediate (WTI) for February delivery tanked to $27.32 per barrel, a level last seen on September 24, 2003.

The contract later stood at $27.80, down 66 cents from Tuesday’s closing level.

The global oil market has collapsed further since the International Energy Agency warned Tuesday that the oil market could “drown in oversupply”. Prices have crashed about 75 percent since mid-2014, hit by a perfect storm of a stubborn supply glut, the slowing global economy and the rebounding US dollar.

“A stronger dollar continues to present significant headwinds and supply increases show little sign of letting up any time soon,” Sucden analyst Kash Kamal told AFP. “This is very much a supply issue, as global demand has on the whole been quite healthy — but it is likely we will see additional price declines and tighter margins before producers are prompted to cut output.”

The strong dollar meanwhile makes dollar-priced crude more expensive for buyers using weaker currencies. In turn, that dents demand and prices.

Approaching midday in London, Brent North Sea crude for delivery in March slid 67 cents to $28.09 compared with the close on Tuesday.

Brent had tumbled on Tuesday to $27.67, a low last witnessed on November 25, 2003.

Crude futures are also in freefall with the supply glut set to worsen, as Iran pumps out extra barrels after the lifting of Western sanctions on Tehran.

The IEA predicted Tuesday that prices would fall further this year as supply vastly exceeds demand, with major oil exporter Iran’s return to the market offsetting any production cuts from other countries.