Oil price plunges to 12-year low

web-photo-total-oil-071215

A view of the podium inside the headquarters building of the French oil firm Total, in La Defense, the finance district in Western Paris, France, 21 October 2014.

A view of the podium inside the headquarters building of the French oil firm Total, in La Defense, the finance district in Western Paris, France, 21 October 2014.

web-photo-total-oil-071215

A view of the podium inside the headquarters building of the French oil firm Total, in La Defense, the finance district in Western Paris, France, 21 October 2014.

A view of the podium inside the headquarters building of the French oil firm Total, in La Defense, the finance district in Western Paris, France, 21 October 2014.

LONDON - World oil prices gushed below $32 (R542) on Monday for the first time in 12 years, as the market was consumed once again by the global supply glut and Chinese demand fears.

US benchmark West Texas Intermediate for February slumped to $31.31 per barrel, which was last witnessed on December 23 2003.

European benchmark Brent North Sea crude for February delivery tipped to $31.48 a barrel in late-afternoon deals, a low last seen on April 7 2004.

Prices had already plunged by 10 percent last week, striking similar lows, as concerns about China, the world&39;s biggest energy consumer, eclipsed a strong US jobs report.

"At the moment not many people are expecting to see a significant rebound in oil, so prices are continuing to gush lower to multi-year lows as sentiment goes from bad to worse," Gain Capital analyst Fawad Razaqzada said.

Oil extended last week&39;s collapse on worries about China&39;s growth slowdown and a stubborn supply glut that plagued the market in recent years.

Oanda analyst Craig Erlam added the market could soon breach the key psychological barrier of $30, beset also by the strong dollar.

The rising greenback makes dollar-priced crude more expensive for buyers using weaker currencies. That tends to dent global oil demand and hurt price levels.

"All fundamental factors seem to put  [prices] lower for crude, be it oversupply, the slowdown in China leading to falling demand, and the stronger dollar.

"The case against crude falling below $30 appears pretty weak at this stage, especially when geopolitical risks are being so overlooked."

Simmering geopolitical risks in the oil-rich Middle East tend to send oil prices spiking on worries about supply-side risks.

However, thecontinuing row between top Opec producer Saudi Arabia and fellow member Iran has helped push prices lower, as traders bet the cartel was now less likely to cut output.

Sanjeev Gupta, head of the Asia-Pacific Oil and Gas practice at professional services organisation EY in Singapore, argued that prices could win support in the coming weeks from the Middle East tensions.

"Rising tensions between Saudi Arabia and Iran could support the upswing of oil prices in the short term," he said.

But Gupta cautioned that oil markets would be closely tracking new economic data from Europe and China, and "further signs of a slowdown will put further downward pressure on the price of crude".

On Sunday, top Arab diplomats rallied behind Saudi Arabia in a dispute with Iran that has threatened to derail efforts to resolve Middle East conflicts including the war in Syria.

The row between the two major oil producers erupted on January 2 after Saudi Arabia executed a prominent Shiite cleric along with 46 others on terrorism charges.

So far this year, oil has been hammered by persistent crude oversupply, brought about by high production levels in the Organization of Petroleum Exporting Countries (OPEC) and in the United States, as producers compete for market share