USA oil prices may fall into the $20s if tanks used to store crude start to fill up before producers sufficiently curb output, Citigroup Inc. predicted. “For OPEC, we still can produce with the current price”, he said. The battle to reach the bottom of oil prices continues to be driven by Saudi Arabia, which is believed to have among the lowest costs of production in the world.
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Analysts say oil prices will remain lower for longer as the refusal by the Organization of the Petroleum Exporting Countries to curb production is being compounded by an expected increase in supply from Iran and Libya.
“There’s likely to be some positioning in front of the possible lifting of the ban”, said Olivier Jakob, managing director of consultants Petromatrix GmbH in Zug, Switzerland.
Less affluent OPEC states like Algeria, Angola, Nigeria and Venezuela, have been calling for production cuts in order to increase crude prices.
But this chart, which comes to us from analysts at Citi, makes it clear that prices are going to have to go lower still to get production entirely halted.
“We are seeing nothing unusual about this week’s price bounce given the fact that the entire complex had become much oversold based on virtually all of our technical indicators”, he said. Members are showing “renewed determination” to maximize output, the International Energy Agency said in a report last week.
Rounding out action in the Nymex energy market, prices for January gasoline ended at $1.244 a gallon, down 1.1 cents, or 0.9%, but January heating oil tacked on 1.9 cents, or 1.7%, to $1.147 a gallon. “If there is no more supplies, there will be less supply to the market”. If it keeps falling, oil will take out the crisis low of $32.40 a barrel that was set in December 2008 and fall to the levels unseen since April 2004.
With oil prices now sitting at their lowest levels in nearly seven years, OPEC could be forced into emergency action in the coming weeks to help stabilise the market. “Opec has a major role in shaping oil prices and availability”, he told reporters after the meet. “They export some but they need to import the same quantity from somewhere else”.
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Meanwhile, Congress is likely to lift its ban on oil exports as part of broader spending and tax legislation, The Wall Street Journal said in a recent article, citing congressional aides of both parties. That’s because American oil producers can’t now export to overseas refiners who are willing to pay a bit more.
