Gene McGillian, broker and analyst at Tradition Energy, said oil prices will probably test the lows of 2008, which would bring WTI to the vicinity of US$32 a barrel. Right now Saudi Arabia and Russian Federation have to convince our refineries to buy their crude over US shale oil.
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What we have here is an issue of crude quality and the ability to move supply to where it is needed.
“We remain reluctant to suggest that a long-term price bottom has been established anywhere across the complex”, said Jim Ritterbusch, founder of Chicago-based oil consultancy Ritterbusch & Associates. The immediate thought is allowing more oil into an oversupplied market would be bearish.
The U.S. Energy Information Administration will release its weekly report on oil supplies at 10:30AM ET Wednesday.
US output has fallen since June as the crude-price collapse squeezes out high-cost drillers, indicating that OPEC’s year-old strategy to keep pumping to defend market share is starting to work.
An elimination of the export ban will create an estimated 1 million American jobs, resulting in an additional $170 billion for the US economy, Ryan said in a statement. That survival-of-the-fittest strategy means refusing to cut output unilaterally, waiting to outlast other producers before they beg Riyadh to collaborate in joint supply curbs to rescue prices.
Another potential source of supply for worldwide markets, if not immediately, would be US crude should lawmakers vote to lift a ban on exports as early as Friday.
Trading sentiment weakened, tracking a subdued trend in Asia where oil extended losses after another report showing a further increase in USA stockpiles added to fears about a global glut, while dollar strengthened after the Federal Reserve hiked interest rates, analysts said.
“Regional demand for oil products at the higher-end of the barrel, notably gasoline and naphtha, remains strong, providing opportunities for refiners to capitalize on higher margin products”, said BMI Research, noting sustained low prices also bode well for emerging markets in the region, such as India, Pakistan, and the Philippines.
“I have been engaged in this business all my life”.
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Aside from the EIA data, the Fed announcement on Wednesday could also cause swings in oil prices, traders said. Analysts in a Reuters poll had forecast a decrease of 1.4 million barrels.
