MELBOURNE (BLOOMBERG) - Oil traded below US$48 a barrel as the US signalled it won't intervene in the market even as prices decline.
Futures fell as much as 3 per cent in New York from the Jan. 16 settlement after floor trading was closed Monday for the Martin Luther King Jr. holiday.
The US, the world's biggest oil user, will let the market decide what happens, according to Mr Amos Hochstein, the State Department's energy envoy. Iran is strong enough to withstand a deeper slump even if it must sell at US$25 a barrel, Oil Minister Bijan Namdar Zanganeh said.
Crude collapsed almost 50 per cent last year as the US pumped at the fastest rate in more than three decades and the Organisation 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, Mr Zanganeh said.
West Texas Intermediate for March delivery was down US$1.19 to US$47.94 a barrel in electronic trading on the New York Mercantile Exchange at 11.24am in Sydney. Brent for March settlement slid US$1.33, or 2.7 per cent, to US$48.84 a barrel on the London-based ICE Futures Europe exchange on Monday.
"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," Mr 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."
US 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.