Oil price extends losses with $1 trillion in projects on the line

Prices of crude oil futures have continued to move lower so far in today’s session, with Brent holding slightly above the $60 level. Crude futures received a fresh blow today as Chinese factory activity contracted for the first time in seven months.

Brent for January delivery had shed 51 cents, or 0.84 percent, to $60.55 as of 07:05 GMT on the London-based ICE Futures Europe exchange. The benchmark fell following news that Chinese factory activity shrank for the first time in seven months in December. According to today’s flash release, the HSBC China Manufacturing PMI dropped to 49.5, down from November’s final reading of 50.0.

Meanwhile, Goldman Sachs warned that almost $1 trillion (£ 640 billion) of spending on future oil projects is at risk following the plunge of Brent towards $60 per barrel, The Financial Times has reported. Projects in challenging frontier regions like the deep waters of the Gulf of Mexico are predicated on high oil prices of at least $70 per barrel. Any cancellation of these developments would deprive the world of 7.5 million barrels per day of new production over the following decade or about eight percent of current global oil demand.

January WTI futures had fallen 0.63 percent, or 35 cents, to $55.56 in electronic trading on the NYMEX in New York as of 07:05 GMT. Yesterday, the contract fell to $55.02, the lowest since May 2009. The Wall Street Journal cited Jameel Ahmad, chief market analyst at FXTM in London, as saying:

“The bears are continuing to exploit the economic conditions that are aggressively against the oil markets at present. Despite already having dug down through various psychological support levels over recent weeks, there is still no floor in sight”.

Based on the two front month contracts, Brent was trading at a premium of $5.12 to WTI as of 07:05 GMT, down three cents from yesterday’s $5.15 close. Last Tuesday the premium ended at $3.02.