In truth, the ban has done very little except bottleneck oil development in the past few years. He had insisted that oil prices would eventually be revived once excess production had been knocked out of the system and for that to happen Opec had to keep producing at its current target level.
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Oil has managed to hold above the key $40 a barrel mark, but US banking giant Citigroup said on Wednesday prices could fall to $32 a barrel, a multi-year low last seen in 2008. It is also a way to flex its muscle at a time when its grip on the global oil market has faded. “Fear of slowing growth in China is increasing”. This report showed U.S. commercial crude inventories increased by 2.6 million barrels last week.
“Eventually, supply and demand will come into balance, but it will take awhile”, said Chip Hodge, senior managing director at John Hancock in Boston. “And hundreds and billions in cancelled projects”, said Walter Zimmermann Jr, vice president and chief technical analyst at United-ICAP.
WTI briefly fell below $40 a barrel for the first time since February 2009, to $39.86.
China economic concerns were given more justification after the Chinese preliminary Caxin purchasing managers’ index (PMI) fell to a near six-and-a-half-year low to 47.1 in August. “But the good news is consumers stand to benefit”.
He still has a forecast that Brent prices will average $63 per barrel next year, but with “significant downside potential” because of new supply from sources including Iran, once sanctions are formally lifted on its oil exports.
Gasoline futures rebounded from early losses and settled up 1.03 cents, or 0.7%, at $1.5449 a gallon.
That’s down from $3.44 a year ago. Does it mean that the prices are all set to plunge significantly lower breaking the previous intermediate lows? As oil prices slump, the risk of worsening political turmoil is rising within “most vulnerable’ in OPEC“. Private-equity firms, which have amassed large energy-focused funds, could find buying opportunities among distressed producers.
Shale production has also been cushioned by a seemingly never-ending string of technological advances that have reduced drilling costs. Many companies reported higher-than-expected production in their second-quarter earnings. You go to Houston and nobody talks about the economic benefit of lower oil prices. Companies that primarily drill for oil onshore in the U.S., such as Continental Resources, have suffered even steeper declines.
Some see that as part of a strategy to pressure American shale oil producers and drive them out of business.
“I would love to see the markets settle down here” for longer than a month to force a drop in production, he said. Should US Federal Reserve Chair Janet Yellen & Co move sooner rather than later, it would strengthen an already strong dollar – the denomination of choice for the oil markets.
Now that we’ve breached $40 US, Pyle notes many analysts say there’s no telling where the next floor might be.
The latter served to underscore lingering concerns that there’s no end in sight for the flood of oversupply in global crude.
Lee-Ashley and co-author Alison Cassady acknowledge that it is hard to predict the full environmental costs of allowing more U.S. crude exports, partly because it is unclear how much the change would drive up domestic oil production and worldwide consumption of the fossil fuel.
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Instead, Saudi Arabia appears to have used its “barrels” to seize more market share from its rivals within Opec rather than those outside.
