In the USA, congressional leaders inched toward agreeing to repeal a 40-year old U.S. oil export ban that could alleviate pressure on oil storage in the world’s biggest producer.
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“I have seen very high price and I have seen very low price too”.
OPEC expects global oil demand to grow by 1.25 million bpd in 2016 and non-OPEC supply to decline by about 400,000 bpd as the price collapse hurts rival producers, more than halving the supply glut compared to this year to about 900,000 bpd.
The Russian central bank is preparing a risk scenario with oil prices at $35 per barrel for the next three years.
The credit rating agency slashed its price assumption for Brent crude, the worldwide benchmark, to $43 a barrel from $53.
“Overall, prices are expected to remain quite low through the first half of 2016, before a weaker USA dollar, more optimism surrounding emerging markets, and a tapering off in production, particularly in the USA triggers expectations for a more balanced market, helping to lift prices to US$55 per barrel by the end of the year”. While Opec regularly holds such institutional dialogue with European Union, Russia, China and the United States, it was the cartel’s first such meeting with India.
With OPEC pumping strongly and USA drillers keep producing large amounts of crude, the Brent/WTI premium has almost halved over the last week to $1.8 per barrel.
Brent traded just 14 cents higher than lows not seen since the financial crisis of 2008 when crude was $36.20 per barrel.
Crude prices may need to fall to the $20s before production stabilizes, says Edward Morse, Citigroup’s commodities guru.
The main reason this is the case is that OPEC nations have a much lower production cost, so they are able to weather lower prices more easily than their higher-cost American counterparts.
The U.S. benchmark rose Monday on speculation that Congress could lift the 40-year-old ban on most U.S. crude exports as part of a broader spending bill. That’s why crude oil prices have crashed below $35.00 USA a barrel and a gallon of gasoline is on the verge of falling below $2.00 US per gallon.
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Global oil markets are already oversupplied as a result of the boom in U.S. output and the Organization of Petroleum Exporting Countries’ refusal to curb its own production.
