Yesterday the blue chip index closed down 1.3% to trade at 5,874 points, its lowest level since December 2012, due to another large drop in oil price. Analysts and traders subsequently said that this was an effective abandonment of production level limits.
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West Texas Intermediate for delivery in March settled just six cents below global benchmark Brent for the same month on Monday – the narrowest gap since 2010.
The WTI financial crisis low reached $32.40 per barrel during December of 2008. In New York, meanwhile, there was more unwelcome news for markets over the weekend. The oil market is now oversupplied to the tune of about three million barrels a day. The cost in Russian Federation is close to $25 for conventional oil and more than $100 for its Artic production, while it is close to $35 a barrel in the North Sea.
Lower oil costs – and their knock on to petrol and diesel prices – have been a key factor holding down the overall level of price inflation in Ireland. Though production in Saudi Arabia fell slightly by 25,000 bpd to 10.13 million bpd last month, it was offset by a 248,000 bpd increase in output from Iraq.
Crude oil prices in Asia on Tuesday failed to hold gains from the U.S.as investors continued to monitor massive over supply. Libyan representatives at a peace conference in Rome on Sunday pledged to sign a UN-brokered deal Wednesday that would be “the only legitimate basis for a solution” to the country’s crisis, said U.S. Secretary of State John Kerry.
Pain was also acute in other corners of the energy market. On December 7, WTI crude oil fell more than 5 % because of the supply glut.
All of this explains why some are bracing for even lower prices. Financial headwinds, such as the stronger dollar and negative sentiment towards commodities in general should also ease next year, supporting prices, they believe.
Analysts have ratcheted down their oil-price forecasts in recent weeks, and some now expect average oil prices in 2016 to be lower than in 2015. On Friday, the International Energy Agency (IEA) projected that global demand growth will slow considerably over the next year, increasing the gap in the supply-demand imbalance worldwide. Look back a few months, when the oil price was over $50 a barrel, and you can see the extent of what has happened.
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Supporters of repealing the ban say it will return oil workers to the job in places like the Eagle Ford shale by opening new markets for the crude oil they produce.
