U.S. crude oil prices remain near 7-yr lows as OPEC glut bites

By Henning Gloystein
SINGAPORE, Dec 8 (Reuters) - Crude prices remained near
7-year lows in early Asian trading on Tuesday as OPEC continues
to pump near record oil to defend market share, compounding a
glut that is seeing hundreds of thousands of barrels produced
every day in excess of demand.
Benchmark Brent and WTI futures both fell over 6 percent the
previous session to reach 2015 lows, and they are closing in on
levels last seen during the credit crunch of 2008/2009. Should
they break through 2008/2009 lows, the next downward target
would be levels not seen since the early 2000s.
U.S. crude CLc1 was trading at $37.83 a barrel at 0032
GMT, up 18 cents from its last settlement but close to the 2015
and 7-year lows of the previous session.
"The decision by OPEC-members to keep oil production output
at record high levels ... suggested that the organisation was
effectively abandoning its long-term strategy of limiting
production and acting as a cartel, leading to more downward
pressures on oil prices in the short term," said Sanjiv Shah,
Chief Investment Officer of Sun Global Investments.
The Organization of the Petroleum Exporting Countries
failed to agree on an oil production ceiling last Friday after a
disagreement between Saudi Arabia and Iran meant that the group
for the first time in decades didn't even mention an output
quota, which previously stood at 30 million barrels per day
(bpd).
OPEC's output of more than 30 million bpd has compounded an
oil glut, pushing production 0.5 million to 2 million bpd beyond
demand and putting many producers under pressure, especially
small-sized U.S. shale drillers that have piled up large amounts
of debt.
"As we see higher oil output from (non-OPEC) Russia, Iraq
and, most importantly, Saudi Arabia, we are likely to see a
continued pressure from the resultant low oil prices. This will
affect U.S. shale producers as well and therefore an increase in
new investment in the sector is unlikely. This will support
prices in the medium term," Shah said.