Singapore, January 20

Crude futures slumped again in Asian trade today, with US oil dropping over three per cent towards $27 a barrel and its lowest since 2003, on worries about global oversupply.

That came after the International Energy Agency (IEA), which advises industrialised countries on energy policy, warned that oil markets could ‘drown in oversupply’ in 2016.

The crash hammered Asian stock markets with MSCI’s broadest index of Asia-Pacific equities outside Japan falling 2.8 per cent to a four-year low.

“Oil prices are at a level where OPEC nations are all struggling. They are selling oil for cash flow not for profit,” said Jonathan Barratt, chief investment financial officer at Sydney’s Ayers Alliance. “US producers are holding out, but I think they’re bleeding.”

US crude futures were trading down 97 cents at $27.49 a barrel, or 3.4 per cent, at 0800 GMT, the lowest since September 2003.

The contract settled down 96 cents, or 3.26 per cent, the session before.

The expiry of the February contract on Wednesday was ‘probably’ adding further downward pressure on US West Texas Intermediate oil as traders closed positions, said Michael McCarthy, chief market strategist at Sydney’s CMC Markets.

Brent futures dropped 60 cents to $28.16 a barrel, or 2.1 per cent, not far from the 12-year low hit on Monday. It settled up 21 cents, or 0.7 per cent, in the previous session.

McCarthy said the market had already taken into account the 500,000 barrels per day Iran has forecast it will add to global production.

“(Iran) is really another strike in the same beating the market has taken,” McCarthy said.

US commercial crude oil stocks were forecast to have risen by three million barrels last week.