LONDON: Oil prices resumed their downward spiral Monday as profit-taking set in after recent strong gains won thanks to hopes of more central bank stimulus to prop up the global economy.
Prices ended on a buoyant note Friday, with both main oil contracts soaring by about 10 percent. The upward momentum continued into Asian deals on Monday, before dropping back.
“The 20 percent or so rally in oil prices from their… lows is certainly something that cannot be ignored and given how strongly oil and stock prices have been correlating lately this is also a positive development for equity markets,” said Gain Capital analyst Fawad Razaqzada.
Around 1245 GMT, Brent North Sea crude for delivery in March was down 73 cents at $31.45 a barrel.
US benchmark West Texas Intermediate for March slid 84 cents to $31.35 a barrel compared with Friday’s close.
World oil prices and equities had surged late last week on hopes of extra stimulus for Japan and the euro zone.
Before then, the market’s dramatic slump culminated with New York crude collapsing to $26.19 per barrel — a level last seen in May 2003.
Brent oil last week skidded to $27.10 — the lowest level since November of the same year.
On Monday meanwhile, the head of OPEC repeated that he wants oil producers outside the Organization of the Petroleum Exporting Countries to assist in reducing the global oversupply.
“It is vital the market addresses the issue of the stock overhang,” Secretary General Abdullah el-Badri told a conference in London.
“It should be viewed as something OPEC and non-OPEC tackles together.”
The world remains awash with oil supplies, a situation that has been fuelled by OPEC’s refusal to curb crude output to squeeze out US shale producers.