USA crude futures extended their losses into a third session and hit a more than two-month low on Friday, dragged down by a relentless climb in oil stockpiles that has triggered a 10 percent drop in prices since the start of November. Although the sharp drop in oil prices is a result of oversupply rather than a lack of demand, fears surrounding the health of the global economy are keeping investors on edge.
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EIA expects that Brent crude oil prices will average $54 per barrel and WTI will average $50 per barrel for full-year 2015.
Crude prices have fallen more than 45% over the past year since OPEC roiled global markets with its decision to leave its production ceiling above 30 million barrels per day in an effort to maintain market share. Oil inventories are growing because supply growth still outpaces demand, the 12-member exporters group said in its monthly report on Thursday. “The net result is brimming crude oil stocks that offer an unprecedented buffer against geopolitical shocks or unexpected supply disruptions”.
Since oil prices began falling in June 2014, Opec has followed a Saudi-led policy of keeping production high in order to defend market share against other producers such as Russian Federation and North America.
OPEC is trying to convince the world that demand will be better next year and beyond, but right now the world is facing a “heck of a glut”, and that glut will persist a long time at present over-production level.
“…The current forecast is for a mild winter in Europe and the U.S. If it turns out to be true, bulging stock levels will add further pressure and oil market bears may choose not to hibernate”, the IEA said.
The slump extended to oil products as well, with USA gasoline futures closing near 10-month lows. But crude oil prices decreased after the inventory report mentioned above due to an increase in inventory levels.
UBS forecasts an average $US55 for the first half of 2016 and $US60 for the second half, rising to $US80 a barrel by 2019. The report comes just before an important December 4 OPEC meeting in Vienna.
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Moreover, OPEC leaders showed no intention to cut the output in face of the price plunge.
