The company’s share price has fallen 9 percent this year alone. The most immediate catalyst for price declines may be concerns about declining demand in China, but the fundamentals of supply and demand are ultimately what’s behind the incredible downward ride of oil prices since 2014.
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Brent crude oil gained 1.8 percent to start the day Wednesday in NY at $31.42 per barrel.
“So we’re already looking at the cheapest and lowest crude price anywhere right here in our own backyard”, he said. The average price of a gallon of gasoline fell below $1.97 this week, compared with $3.68 about 18 months ago, according to AAA.
Oil rebounded on Wednesday with investors hunting for bargains after oil fell to a new 12-year low below the $30 mark in the previous session.
In the United States, the Energy Department said Tuesday that it expects US crude to average $38.54 a barrel in 2016.
But layoffs across the oil industry are mounting, and oil company bankruptcies are expected to soar.
BP’s plan to cut 4,000 jobs worldwide could extend to jobs tied to its operations in the Gulf of Mexico region, though the company has yet to detail the number of layoffs planned in North America.
Just this week Morgan Stanley warned that the super-strong USA dollar could drive crude oil to $20 a barrel.
A boom in US oil production thanks to new drilling technology helped push global supplies higher in recent years.
The decision this winter by President Xi Jinping’s government to suspend fuel price cuts amid oil’s slump, while the country’s biggest cities were shrouded in smog, was explained as an attempt to curb vehicle pollution. Analysts project that supplies of distillate fuel, a category that includes heating oil and diesel, climbed 1.2 million barrels. Economists at the Federal Reserve Bank of Dallas believe excess inventories won’t begin falling until 2017. Since then, production outpaced demand and, more recently, China’s economic problems and the dollar’s appreciation have added pressure.
Oil has been dragged lower by a glut, China’s weakening economy and stock market turmoil, as well as the strong dollar, which makes it more expensive for those using other currencies to buy oil. In 2015, China exported 36.15 million tons of oil products, up 22% on-year.
Motorists are saving every time they fill up.
Increased Iranian oil output should feed into oversupply this year with the expected lifting of Western sanctions on that country’s exports, the US Energy Information Administration (EIA) said. “But when the clamor for lower prices becomes a stampede, warning signs and alarm bells tend to start going off, which suggests that a more prudent approach might be advisable”.
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Gordon Kwan, the regional head of Nomura oil and gas research, called the situation a “crisis of confidence” in the Chinese economy.
