The overwhelmingly bearish sentiment that has pushed oil from above $115 per barrel last June returned to the fore as fresh evidence emerged that low prices are doing nothing to ease heavy oversupply.
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WTI (West Texas Intermediate) crude oil prices closed at $35.6 per barrel on December 11.
The weakness in crude has spread to some oil products, hitting prices.
Oil production declined from 100,000 barrels a day in 2010 to current estimated levels of 800,000 barrels a day-a decrease of 20 per cent. In August the country recorded a production low of 75,238 barrels a day.
On a more cautionary note, the broker added: “However, oil market oversupply is not that large historically speaking, so while downside risks loom larger, upside potential can not be ignored”.
“OPEC’s strategy seems to be working”, writes The Atlantic’s Bourree Lam. “Low oil prices have already led to rig closures across America, and it’s expected that high-cost oil-production (the sort that is common in the US) will be the first to be edged out of the market altogether”.
Moody’s also significantly reduced its medium-term price assumptions for Brent and WTI to US$63 and US$60 per barrel, respectively. Traders expected the stockpiles to decrease by 0.5 million barrels, Xinhua reported.
Crude oil futures slipped in early Asian trade, adding to a slump on Friday following a forecast from the International Energy Agency (IEA) that the global glut of oil is likely to deepen next year.
“Opec oil producers continue to produce without restraint as they compete for market share, exacerbating the now saturated markets”, said Moody’s senior vice president Terry Marshall. That’s because American oil producers can’t now export to overseas refiners who are willing to pay a bit more.
Iran has promised to ramp up supply once nuclear-related sanctions are lifted on its crude exports.
Heating oil and diesel futures on both sides of the Atlantic dropped to fresh 11-year lows on mild pre-winter weather and growing inventories.
“We read any lifting of the U.S. export ban as a significant structural change…Lifting the ban could help to clear USA crude oil stocks”, said Olivier Jakob, an analyst at consultant Petromatrix.
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Oil produced in the United States fell below $35 a barrel in early trading, although the price recovered somewhat in the hours afterward to reach $35.27.
