Oil prices plunged more than 3 percent on Tuesday after Saudi Arabia said Opec production cuts were working well and there was no need for an emergency meeting of the producer group. US crude settled down $1.78 to $51.21 per barrel after touching $50.53, the lowest level since May 26, 2005, in earlier activity. Brent futures shed 86 cents to $52.26.
The price has fallen around 16 percent since the end of last year, in part due to warm weather in the US Northeast, the world's top heating oil market, in early January. "We took measures in October in Doha and measures in Abuja (in December) and I believe these measures are working well. Inventories in the fourth quarter have come down ... which puts the market closer to balance," Saudi Oil Minister Ali al-Naimi said in New Delhi.
"Do not panic. Actually there is no reason for a meeting." The Organisation of the Petroleum Exporting Countries (Opec) agreed to cut 1.2 million barrels per day (bpd) of output from November 1 and then to cut another 500,000 bpd from February 1.
There has been speculation Opec could hold an emergency meeting before its next scheduled conference on March 15. Venezuelan Energy and Mines Minister Rafael Ramirez has said oil prices had fallen "too much" and that he would favour an extra meeting.
Other commodities have also faced a rocky start to the year and base metals fell in early trading on Tuesday before stabilising around midsession. "We should not underestimate the global mood on commodities," said Frederic Lasserre of SG CIB in Paris. "There is not as much appetite for commodities anymore."
He predicted oil prices would test $50 in the near term, but then fresh buying interest could emerge. Analysts said Opec would also brake the slide and deeper price falls could drive the cartel to implement further cuts. "We don't really see a collapse in prices. The further it goes down, the more hesitant the market will be about going even further," said Eoin O'Callaghan of BNP Paribas. "Opec still has an impact on the market."