Brent Crude Hits Five-Year Low

By Josie Cox 

The price of oil continued to tumble in early trading Tuesday, with Brent crude hitting a fresh five-year low, slamming energy stocks and the currencies of commodity-dependent economies.

In early trade, Brent crude, which has now fallen more than 40% since the start of the year, was down an additional 1.2% at $65.37 a barrel--a level last seen in August 2009.

The Stoxx Europe 600 index of oil and gas companies fell 2.4%, taking its year-to-date decline to almost 13% and making it the region's worst performing index of the day. Not a single name was trading in the green at the open. The biggest decliners included Seadrill Ltd., Premier Oil PLC and Fugro NV.

ING credit strategist Nadège Tillier said that for the majority of OPEC members, a price of $65 a barrel already means selling oil below the cost of production.

"In in the long run, a price below $85 per barrel means financing difficulties for most oil and gas companies," she said.

On Monday, U.S. oil giant ConocoPhillips had already said it would cut capital spending by 20% next year to $13.5 billion, a sign that it is treating the plunge as more than a temporary dip.

Jefferies economists meanwhile, published a note on Tuesday in which they lowered their average price forecast for Brent in 2015, 2016 and 2017 by 16% to $72, $83 and $90, respectively. They had already cut forecasts in October but said that the latest fall is "more material" than expected.

In currency markets, Russia's ruble stumbled. The currency has depreciated by more than 40% against the U.S. dollar so far this year.

Nigeria's naira was around 0.7% lower against the buck, after the country's central bank on Monday sold an additional $200 million of reserves, in an attempt to strengthen its ailing currency, according to a memo written by the central bank.

One dollar currently buys just under 180 naira, almost 13% more than at the start of the year.

Beyond oil, the picture was equally bleak across Europe, where stocks fell deeper into the red, extending a day-earlier move inspired by weak data from Asia and Europe.

Having closed the previous session 0.7% lower, the Stoxx Europe 600 fell an additional 1% early Tuesday, mirroring similar falls on country indexes in Germany, France and the U.K.

The biggest faller on London's FTSE 100 index was beleaguered retailer Tesco PLC. Its shares fell more than 16% after it lowered its full-year profit forecast, citing changes it has made in the wake of an accounting scandal and investment in its business amid fierce competition.

Japan's Nikkei index closed lower on Tuesday too, snapping a seven-day winning streak, after figures Monday showed that the economy had contracted 1.9% in the third quarter.

In the U.S., the S&P 500 on Monday recorded its biggest one-day percentage drop since last October.

Write to Josie Cox at [e-mail]

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