If Brent falls below US$36 per barrel, it would reach levels last seen in 2004 at the start of the so-called commodities super cycle.
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As for gasoline and diesel prices, Diesel Driver says the last time these were as low as they are now in United States was in 2007.
Global stock markets fell sharply Tuesday as oil prices remained near six-and-a-half year lows following last week’s decision by the OPEC oil cartel to leave production unchanged.
Brent crude will average $51 in the first quarter, according to the median estimate of analysts surveyed by Bloomberg, compared to the current price of $40.79 for the January futures contract on the ICE Futures Europe exchange.
The weakness in energy stocks looks set to continue until OPEC cuts production.
Saudi Arabia’s influence over oil prices has waned, Jason Tuvey, Middle East Economist at British economic research and consulting company Capital Economics said in a report obtained by Trend. Until then, a change in strategy is unlikely. Economists have signaled that the country is presently locked in a “game of chicken” with the recent emergence of shale producers in the U.S.
OPEC’s output of more than 30 million barrels per day (bpd) has compounded an oil glut, pushing production 0.5 million to 2 million bpd beyond demand and putting many producers under pressure, especially small-sized US shale drillers that have piled up large amounts of debt. That simply tells us it’s far too early to seek a bottom in oil prices. It’s simple supply and demand.
LONDON – Oil prices rose on Wednesday on strong Japanese economic data and lower crude oil storage figures from the U.S., but many investors expected a fall to below 2008 lows due to a mounting global supply glut. That will continue to weigh on the earnings of energy companies like Chevron (CVX), in October reported a 37 percent year-over-year drop in revenue.
Oil tumbled after Friday’s meeting of the Organization of the Petroleum Exporting Countries (OPEC) which all but abandoned price support for crude through production cutting the group once resorted to.
This situation is also leading to yet more oil drilling operations shutting down, with the number this week at just 545, around one third of the amount of rigs that were operating just a year ago.
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When, and if, that happens, low energy prices will keep weighing on stocks via the impact on energy sector earnings.
