The world is still producing some two million barrels of oil a day more than it uses, and one of the warmest winters on record has destroyed typically heavy demand, leading to inventories of unwanted oil and oil products ballooning.
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Oil prices have lost almost 75 percent of their value in the past 18 months amid increased US shale oil output and OPEC’s refusal to cede market share by cutting output.
Moody’s Investors Service has reduced its price estimates for Brent crude and West Texas Intermediate crude amid continued oversupply in the oil markets and the risk of additional supply from Iran.
Venezuela wrote to fellow OPEC producers requesting an emergency meeting as the collapse in oil prices hurts the group’s most vulnerable members, according to five people with knowledge of the matter.
The reason being, bearish traders laying a bet that long drawn low prices in the oil market might just come to an end as a massive snowstorm hits the East Coast of the United States.
Prices had fallen this week to record lows.
The price of Brent crude has increased by 5% after cold weather in the USA and Europe lifted demand for heating oil.
Today, with falling global demand for oil, the slowdown in the Chinese economy and the refusal of Saudi Arabia to cut oil output levels, the world has far more oil than anyone needs.
The proxy war between Saudi Arabia and Iran is set to be more complicated with Iran’s new decision to flood the market with oil.
“We are reaching the bottom of the oil market”. Oil exports fell to an average of 1.4 million barrels a day in 2014 from 2.6 million barrels daily in 2011, the year before the U.S. and European Union intensified sanctions, the U.S. Energy Information Administration said in June. Based on the EIA’s latest forecast, oil prices are expected to remain at around $38 per barrel, which is quite a drop from its previous forecast of $50.89 a barrel. It produced 2.7 million barrels a day in December, data compiled by Bloomberg show.
OPEC oil supply in 2017 is expected at 32.3 million barrels per day.
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While crude futures on both sides of the Atlantic were poised for their first weekly gain this year, analysts cautioned that the bounce in prices could be driven by sentiment given soaring inventories amid persistent overproduction. BP Plc CEO Bob Dudley said the market was facing a “flood of oil”, while Glencore Chairman Tony Hayward said “oversupply” would keep prices around current levels “for some time”.
