By Lydia Tomkiw -
The price for 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. EST, 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 a barrel, one of the major problems facing the market is the current excess supply of oil with the potential of even more oil coming onto the market following negotiations about lifting sanctions against oil-producing nation Iran last month. The Organization of Petroleum Exporting Countries (OPEC) said that there is an oversupply on the market of over two million barrels per day. The oversupply stems from high output from Saudi Arabia and Iraq.
China’s currency devaluation last week, which lead to over 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 today was the release of a new 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.