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Oil falls below $56, heads for biggest annual drop since 2008

Oil falls below $56, heads for biggest annual drop since 2008

LONDON: Oil dropped below $56 per barrel on Wednesday and was heading for its biggest annual decline since 2008, pressured by weakening demand and a supply glut prompted by the US shale boom and Organization of the Petroleum Exporting Countries (OPEC) refusal to cut output.

Global benchmark Brent crude has fallen 49.5 percent in 2014 as demand growth slowed, the United States expanded output and OPEC, dropping its strategy of trimming supply to keep oil around $100 a barrel, chose instead to defend market share.

Tony Machacek, Oil broker at Jefferies Bache in London, said here we are on the very last session of the year and Brent is making new lows again. Brent was down $1.91 at $55.99, after dropping as low as $55.93, it’s lowest since May 2009. US crude was down $1.11 at $53.01.

Prices came under further pressure from a survey showing China’s factory sector shrank for the first time in seven months in December, bearish indication on the strength of oil demand in the world’s second largest consumer.

The annual decline for Brent is set to be the biggest since 2008, when demand crumbled in response to the financial crisis. Prices were, eventually, propped up by OPEC’s last formal decision to cut production.

OPEC at Nov. 27 meeting this year decided against a cutback to defend its market share against shale oil and other competing supply sources, despite its own forecasts of a growing surplus in 2015.