As one of the world’s leading crude producers, but not an OPEC member, Russia’s involvement in potential action to support prices has been the source of much speculation since prices started tumbling in the second half of 2014.
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Brent for January settlement slid 4.5 per cent on the London-based ICE Futures Europe exchange on Friday, and contributing to a 12 per cent drop on the week.
The International Energy Agency delivered its final report on Friday. Moreover, according to the EIA, US production in November fell by 60,000 barrels per day.
After yesterday’s recovery in the Brent price, it again came under renewed pressure during the time of trading, today morning it finds itself at a new 7-year low at $39.5 per barrel.
The IEA sees a 0.6 million bpd decline from non-OPEC in 2016, unchanged from last month’s report, as USA light tight oil, the driver of non-OPEC growth, shifts into contraction.
A report from ABN Amro says the market “is strongly positioned for further price declines” due partly to the “large number of short contracts in the market”.
However, the extra 230 million barrel capacity in the United States is more likely to extend the overhang of supply as demand wanes.
“World oil markets will remain oversupplied at least until late 2016 … although the pace of global stock builds should roughly halve next year”, the IEA said in its monthly report.
There are also broad concerns about growth, especially in emerging markets, which in previous years have driven demand growth in raw materials.
Numerous smaller operators have gone out of business or are holding on, in what the legal and restructuring players call a “zombie” position.
The agency says that defaults are now as high as back in 1999 and the future looks bleak. Exxon Mobil Corp., the world’s biggest oil company, has lost $11 billion of its value and PetroChina Co. more than $17 billion, according to data compiled by Bloomberg.
“With key benchmark commodity indexes below levels last seen in the 1990s, and Chinese demand set to remain weak, it is clear that commodity prices remain some way short of giving any evidence of bottoming out”, said Michael Hewson, chief market analyst at traders CMC Markets UK.
Oil demand is still expected to grow next year at an estimated 1.25 mln barrels a day, down from 1.53 mln barrels a day this year. Analysts wonder whether these measures alone are enough to sustain the new lows of crude oil prices.
The expected result from growing demand and a decrease in capital investments will be a significant rebound in crude prices.
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Early indicators for the fourth quarter of 2015 show growth easing to 1.3 mb/d year-on-year from a third quarter peak of 2.2 mb/d, the IEA noted.
