Oil prices slid close to a four-year low under $33 per barrel on Tuesday in a market plagued by weak global demand, analysts said.
New York’s main contract, light sweet crude for delivery in February, fell as low as $32.70 a barrel. It later recovered slightly to stand at $33.57, down $2.94.
The February contract expires at the close of trade today, to be replaced by the March contract currently at $40.27 a barrel.
In London, Brent North Sea crude for March dropped 71 cents to $43.78 a barrel.
A large stockpile of oil in the United States has caused the New York contract to “become disconnected” from the rest of the market, said Victor Shum of Purvin and Gertz international energy consultants.
“The Nymex has been under a lot of pressure because stockpiles in Cushing, Oklahoma, are very high. Storage is almost full,” he said. Cushing is the delivery point for light, sweet crude.
Shum added that the higher March Brent price was more representative but said the weak global economy was having a negative impact.
“The global economy is now the main driver of oil… The macroeconomic outlook is bleak, with no signs of a turnaround in the global economy,” Shum said.
Meanwhile the inauguration of Barack Obama as US president later today may have a positive but short-term effect.
“I think any Obama bounce may be short-lived. Equity markets may react positively for a day or two,” said Shum.