Prices reach a new 5.5 year low

*World market hit by Saudi discounts to Western nations

Oil prices tumbled Tuesday to fresh 5.5-year lows as Saudi Arabia blamed weak global economic growth and said it will stick to its guns on production policy.

US benchmark West Texas Intermediate for delivery in February sank $2.11 to $47.93 a barrel, a low last witnessed in late April 2009.

Brent North Sea crude for delivery in February dived $2.01 to $51.10 per barrel, the lowest level since early May 2009.

“The market is still worried that there are no signs that the supply glut will start falling,” Nordea Markets analyst Thina Margrethe Saltvedt told AFP.

James Williams of WTRG said the weakness in the market could take prices below $40 a barrel.

“Basically, there are continuing concerns about OPEC not cutting back, particularly Saudi Arabia, and US production continuing to grow,” he said.

Saudi Arabia’s Crown Prince Salman, in a speech on behalf of ailing King Abdullah Tuesday, said weak growth was to blame for the price fall, which has sliced deeply into the income of the world’s largest exporter.

“This development is not new in the oil market, and the kingdom has in the past dealt with it firmly and wisely,” he said, adding that Saudi Arabia will maintain its “same approach” towards the market.

That appeared to confirm Riyadh’s determination to defend its market share rather than reduce output, even if that pushes prices lower.

On Monday Saudi Arabia reportedly cut its European and US export prices in order to maintain market share.

The wobbling oil prices have had a direct impact on US stocks as they fell again Tuesday on another stormy day for global financial markets.

At the closing bell, the Dow Jones Industrial Average stood at 17,368.04, down 133.61 points (0.76 percent).

The broad-based S&P 500 dropped 18.23 (0.90 percent) to 2,002.35, after spending a good chunk of the session below 2,000. The tech-rich Nasdaq Composite Index sank 59.84 (1.29 percent) to 4,592.74.

“The market doesn’t like uncertainty and the volatility in oil and the volatility in interest rates have certainly created uncertainty,” said David Levy, portfolio manager at Kenjol Capital Management.

“Also, the situation in Europe is also very uncertain and we’re lacking a positive catalyst as of today.”