Oil drops below $48 a barrel as U.S. resists market intervention

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NEW YORK. KAZINFORM - Oil traded below $48 a barrel as the U.S. signaled it won't intervene in the market even as prices decline, according to Bloomberg.

Futures fell as much as 3 percent in New York from the Jan. 16 settlement after floor trading was closed Monday for the Martin Luther King Jr. holiday. The U.S., the world's biggest oil user, will let the market decide what happens, according to Amos Hochstein, the State Department's energy envoy. Iran is strong enough to withstand a deeper slump even if it must sell at $25 a barrel, Oil Minister Bijan Namdar Zanganeh said. Crude collapsed almost 50 percent last year as the U.S. pumped at the fastest rate in more than three decades and the Organization of Petroleum Exporting Countries resisted calls to cut supply. While Iran is consulting with producers in the 12-member group to respond to the decline, OPEC has made no decision to reduce its collective output target, Zanganeh said. "The U.S. is not going to cut production and that's the problem," David Lennox, a resource analyst at Fat Prophets in Sydney, said by phone. "If the oil price wants to recover back to where it was, we need to see a reduction of about 1 million to 1.5 million barrels a day. It will need to be a shared cut." West Texas Intermediate for February delivery, which expires today, was $1.23 lower at $47.46 a barrel in electronic trading on the New York Mercantile Exchange at 11:24 a.m. in Sydney. The more active March future was down $1.19 to $47.94. Transactions on Jan. 19 will be booked with Tuesday's for settlement purposes after floor trading was closed Monday. Market Mechanisms Brent for March settlement slid $1.33, or 2.7 percent, to $48.84 a barrel on the London-based ICE Futures Europe exchange Monday. The European benchmark crude ended the session at a premium of $1.04 to WTI for the same month on Jan. 16. "We do have mechanisms to work with our partners around the world if something extreme happens, but that's not where I think we are and I think the markets so far can adjust themselves," Hochstein said in an interview at a conference in Abu Dhabi on Jan. 19. "This is about a global market that is addressing the supply-demand curve." U.S. output rose to 9.19 million barrels a day through Jan. 9, the fastest pace in weekly records dating back to January 1983, data from the Energy Information Administration show. The boom has been driven by a combination of horizontal drilling and hydraulic fracturing, which has unlocked shale formations from Texas to North Dakota.

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