Oil prices fell by 47 percent in 2015 and are expected to decline, on an annual average, by another 27 percent in 2016.
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U.S. Treasury yields were down 1.7 basis points at 2.03 percent, as the fall in oil prices leant some support to safe-haven debt.
On their estimates, the global crude market was set to tighten by about 1.5m barrels a day in 2016, with supplies from outside the Organisation of the Petroleum Exporting Countries set to fall by between 0.5m and 1.0m barrels a day. “By 2018 the ‘Call on the U.S.’ rises by almost one million barrels per day in this case”. For example, a drop in oil prices creates a massive revenue shortfall for the Iranian government that needs at least $100 per barrel to balance its budget.
“Low prices for oil and commodities are likely to be with us for some time”, said John Baffes, Senior Economist and lead author of the Commodities Markets Outlook.
USA crude rose 15 cents at $32.34 a barrel, compared with its session-high of $32.64 and previous settlement at $32.19. US crude was up seven cents at 30.41 dollars. Many investors have lost the stomach for the market after a wild ride since last summer, when shares crashed 40 per cent. Beijing intervened to stem that rout and orchestrate a recovery of sorts, but anyone who mistook that for a bottom and bought in will have lost their shirt again in January.
According to Reuters, Iraq’s oil ministry said on Monday that oil output had reached a record high in December. Nearly 45% of this oil is from domestic production and 55% is imported, 74% of it from Canada, Mexico, Venezuela, and Saudi Arabia.
With the lifting of sanctions on Iran by the US and its allies, there is a renewed apprehension among analysts regarding the steady decline in crude oil prices and its possible negative impact on the U.S.as well as the global economy.
Households, on the other hand, will be able to enjoy lower private road transport and utility costs as low oil prices will help to dampen the domestic prices of oil-related items, said the MTI. The prospect of OPEC members cutting production remains unlikely. Both futures contracts have an underlying physical crude oil trade basis: cargoes of North Sea Brent, Forties, Oseberg, Ekofisk (BFOE) crude oils for the Brent contract and crude oil deliveries to the crude oil storage hub of Cushing, Oklahoma for WTI.
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Traders also watched the dollar as U.S. Federal Reserve policy makers opened a two day meeting on Tuesday. “The market forces, together with cooperation among oil producers, will possibly give back stability to the markets”, he said.
