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Business

Oil prices drop to new lows

Oil prices are continuing down their slippery slope as US crude slid to a near seven-year low after OPEC inaction fanned fears that the current supply glut will continue well into the new year. Has OPEC 'lost control'?

For the first time since early 2009, US crude fell below $37 (34 euros) on Tuesday, dropping more than $1 from its last settlement on Monday. North Sea Brent fared only slightly better as the sound of the opening bell sent the price of a barrel below $40, before clawing its way back past the $40-general.

The tumble follows Monday's plunge of more than 6 percent, although a

surprise hike in Chinese commodity imports

, announced Tuesday, raised hopes that prices could steady somewhat.

"If Brent holds below $40 a barrel, this would be another psychological blow for the buyers, which could lead to further falls as the sellers grow more and more in confidence," said Gain Capital analyst Fawad Razaqzada.

Watch video 01:18

OPEC decides against output cut

'OPEC has lost control'

The strong reactions come after some of the world's biggest oil producers last week failed to agree a production ceiling, with

OPEC members Iran

and Iraq even warning to increase output and exports in 2016.

"OPEC has lost control of the oil market and unless something fundamental changes that causes demand to overtake the oversupply in the market, the path of least resistance is the 2008 lows of $35-$38," said Michael Hewson, chief market analyst at CMC Markets.

The 13 member states' stubbornness to taper production, compounded by weak demand fuelled by China's economic slowdown, have seen crude prices nosedive by more than 60 percent over the past 18 months, from levels above $100 a barrel.

New lows on the horizon?

If Brent drops to under $36 per barrel, it would mark the lowest level since 2004 at the start of the so-called commodities super cycle. According to banks such as Goldman Sachs, that scenario is becoming increasingly likely as global oil stockpiles are bursting at the seams, with some even predicting the world is close to running out of storage space.

Meanwhile, markets are looking forward to Wednesday, when the US will release commercial crude stockpiles data, which will help gauge demand in the world's top oil consumer. A Bloomberg News survey estimated inventories probably rose for an 11th week, indicating softer demand.

pad/uhe (AFP, AP, Reuters)

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