Brent oil falls under $40 for first time since 2009

LONDON — Brent crude prices sank under $40 on Tuesday for the first time in almost seven years, rocked by the Organisation of Petroleum Exporting Countries (OPEC) with a recent decision to maintain oil output levels despite a chronic supply glut.

Sentiment was also soured by weak demand growth, the strong dollar and a broader collapse in other commodity markets.

European benchmark oil contract Brent North Sea oil for delivery in January tumbled to $39.81 per barrel, the lowest point since February 2009.

"After the OPEC decision, or should that be indecision, last week, the question was not if but rather when this would occur," said ETX Capital analyst Daniel Sugarman, in reference to Brent's latest slide below $40.

New York's West Texas Intermediate (WTI) for January also hit a similar low at $36.64 a barrel on Tuesday, having already breached $40 last week.

Crude futures had also slumped on Monday after the OPEC oil producing group refused on Friday to slash record high output, in a market dogged by oversupply.

"If Brent holds below $40 a barrel, this would be another psychological blow for the sellers, which could lead to further falls as the buyers grow more and more in confidence," added Gain Capital analyst Fawad Razaqzada.

"But oil prices have already dropped very sharply in the space of 2.5 trading days, so the selling pressure could start to at least ease going into the second half of the week."

A stubborn supply glut, and weak demand growth fuelled by China's economic slowdown, have combined to send crude prices collapsing by more than 60 per cent over the past 18 months from levels above $100 a barrel.

Traders, meanwhile, are looking ahead also to a meeting of the US central bank's Federal Open Market Committee (FOMC) next week, amid expectations that it will announce its first interest rate hike in more than nine years.

An interest rate increase typically boosts the dollar, which would make dollar-priced oil more expensive to holders of weaker currencies. 

The Federal Reserve announces its latest monetary policy decision on December 16.

"Oil is of course the big story and is likely to be as we run up to the FOMC next week," said GKFX analyst James Hughes.

He added: "It seems that whatever happens OPEC will not budge."