The price of oil fell below $49 a barrel Monday amid continued concerns over China’s economy faltering. Oil had its largest two-day rally in six years last week, but overall was heading for its fourth straight monthly decline, reports said.
As of 9:40 a.m. EDT, Brent crude oil, the global benchmark, rose to $49.24 a barrel according to the Nasdaq. Last week, the Brent benchmark went up by 10 percent, but despite this, prices remain at a low not seen since 2009. Volume was expected to stay low Monday due to a holiday in the United Kingdom.
An analyst told Reuters that the $50-per-barrel mark is proving hard to surpass on the market. “Volatility was high last week, so now we’re seeing some retracement - $50 is proving to be a resistance level,” said Olivier Jakob, analyst at Petromatrix. “It is still a market which is very well supplied.”
In 2014, oil hit over $100 a barrel. Now, with oil dipping below $50, one of the major problems facing the market is the current excess supply, with the potential of even more coming onto the market following negotiations about lifting sanctions against oil-producing nation Iran last month. The Organization of the Petroleum Exporting Countries said there is an oversupply on the market exceeding 2 million barrels per day. The oversupply stems from high output from Saudi Arabia and Iraq.
China’s currency devaluation last week, which set off a 1,000-point drop on the stock market last Monday before recovering, has also triggered fears about a larger slowdown in economic growth both in the country and around the globe. One possible boost to the market Monday was the release of a U.S. government report on domestic oil production for the first half of 2015. The report showed that U.S. output was much lower than expected – down by as much as 130,000 barrels per day.
The large drop in oil prices has a significant impact on oil-producing nations that depend on oil staying above a certain price to ensure their economies run smoothly, including Russia, Venezuela, Nigeria and Brazil.