A vehicle passes behind a board posting oil prices at a service station in Tokyo, Japan on December 16, 2015. U.S. crude prices have fallen 17 per cent in 2016 alone. It has to stop somewhere, right?
Advertisement
Benchmark crude oil proved it can indeed go “lower for longer”, falling briefly Tuesday to below US$30 per barrel before closing at $30.44.
“Asian stocks were mostly lower, even as mainland Chinese stocks ticked higher on stability in the yuan, but European equities are rising on the rebound in crude oil and some upbeat corporate results”, financial analysts Charles Schwab said in a note to investors. Supply is high with the USA fracking tons of crude out of its robust shale basins and Middle East producers refusing to cut production significantly. A little demand positivity came via a surge in China’s imports to a record 334 million tons past year, thank to the price crash. The national average retail price of gasoline is now $1.96 a gallon.
Experts say they expect the barrel price to remain under $50 throughout 2016.
But layoffs across the oil industry are mounting, and oil company bankruptcies are expected to soar. More than 15,000 contracts traded on Tuesday and 18,000 contracts traded on Monday for the February contract, more than doubling Friday’s volumes.
“China had a considerably less volatile session than we had the last several weeks so that helped calm sentiment a bit, but this decline that started out of China continues to persist”, Ryan Larson, head of United States equity trading for RBC Global Asset Management, said.
For the first time in 12 years the trading price of oil dipped below $30 a barrel. Iran, trying to emerge from punishing economic sanctions, is looking to increase exports in the coming months, which could add further to global oil stockpiles.
While demand fears are on the rise, the oil crash has mostly been fueled by a massive supply glut.
Fresh concerns over China’s slowing economy sent oil prices into a steep decline to start off the week.
Motorists are saving every time they fill up.
Airliners, as big users of jet fuel, have been recording record profits, while shippers and other businesses are also saving from cheaper energy. Falling oil prices and concerns over global growth have raised demand for safe-haven debt.
Last year, some 95,000 jobs were lost in the energy sector by U.S.-based companies, according to the consulting firm Challenger, Gray & Christmas. Several have predicted that prices will fall below $30 a barrel and even approach $20 a barrel.
Coupled with a strengthening USA dollar, which has been given a boost following last week’s upbeat nonfarm payrolls report, it is unsurprising that market watchers continue to dial back their estimates for an oil recovery. The latest plunge has also deepened the gap between USA states such as Alaska, Oklahoma, North Dakota, Louisiana and New Mexico, which depend on production taxes to fund education and health care and the rest of the country, which has benefited from low gasoline prices.
Advertisement
Nigeria, Africa’s largest economy and foremost oil producer, has been ravaged by collapsing oil prices because crude accounts for 90 percent of the nation’s export earnings and 70 percent of overall government revenue.
