'No end in sight': Brent crude falls below $45 for first time since 2009

Crude in London slid below US$45 a barrel for the first time since March 2009 on concerns Chinese demand is slowing just as Iran and the U.S. threaten to expand a global glut.

Brent oil fell as much as 6.5 per cent, extending a 7.3 per ent drop last week that was the biggest in five months. Commodities sank to the lowest in 16 years on forecasts for the weakest Chinese growth since 1990, sending investors to seek out the safest assets. U.S. energy companies declined as much as 6 percent on the Standard & Poors 500 index.

Iran's Oil Minister Bijan Namdar Zanganeh vowed to expand output “at any cost,” according to the ministry's news website. The number of active oil rigs in the U.S. rose for the seventh time in eight weeks, data showed Friday.

Oil's worsening global surplus has driven prices down by more than 30 per cent since May. Iran aims to join leading members of the Organization of Petroleum Exporting Countries in raising production while U.S. crude stockpiles are almost 100 million barrels above the five-year seasonal average.

“We're trading at 6 1/2 year lows and have further to go,” Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said by phone. “The risk-off scenario continues to play out. The statements from the Iranian oil minister about fighting for market share didn't help.”

“There is no end in sight to the nose-dive that oil prices have been experiencing,” Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt, said in a report. “It is impossible to say how long the price slump will continue and where oil prices will ultimately bottom out.”

Six-Year Low

Brent for October settlement declined US$2.53, or 5.6 per cent, to US$42.93 a barrel on the London-based ICE Futures Europe exchange at 9:41 a.m. New York time. Futures touched US$42.51, the lowest since March 12, 2009. Brent oil traded at a US$4.88 premium to West Texas Intermediate, the U.S. benchmark.

WTI for October delivery fell US$2.62, or 6.5 per cent, to US$37.83 a barrel on the New York Mercantile Exchange. It reached US$37.75, the lowest since Feb. 24, 2009. Prices fell 4.8 per cent through Friday for an eighth weekly drop, the longest retreat since 1986. Total volume was 49 per cent above the 100-day average.

The Bloomberg Commodity Index of 22 raw materials fell as much as 3 perc ent to the lowest level since August 1999 as China's economic slowdown exacerbated surpluses from oil to metals. The index takes into account the roll costs and gains to reflect the actual returns to investors.

Crude's slump triggered losses in related equities. Oil and natural gas producers plunged to the lowest in almost four years amid the wave of selling. An index of 40 energy explorers dropped as much as 6 per cent on Monday for the steepest intraday decline since November.

Worst-Performing

Chesapeake Energy Corp. was the worst performing oil explorer in the S&P 500 energy index, tumbling as much as 12 per cent to a 13-year low. Exxon Mobil Corp., the largest U.S energy producer, fell as much as 7.7 per cent to US$66.55 a share, the lowest since October 2010.

Iran was OPEC's second-largest producer before international penalties over its nuclear program began in mid-2012. The country will seek to regain oil sales regardless of prices, Zanganeh said last month after negotiators reached a deal with world powers offering sanctions relief.

OPEC, which supplies about 40 per cent of the world's crude, has pumped above its quota of 30 million barrels a day for more than a year, according to data compiled by Bloomberg. Iran's output trailed that of Saudi Arabia and Iraq in July.

“We're about 1.5 million barrels a day oversupplied right now,” Paul Sankey, an energy analyst at Wolfe Research LLC, said on Bloomberg Radio. The Saudis would have made cuts to balance the market in the past but “now but now they are worried about Iran.”

In the U.S., rigs drilling for oil climbed by 2 to 674 through Aug. 21, according to Baker Hughes, an oilfield-services company. That's the highest level since May 1.