Crude prices have been barreling toward Great Recession-era lows since the Organization of Petroleum Exporting Countries’ gathering in Vienna last week, when the cartel made a decision to scrap its longstanding output ceiling.
Advertisement
The global oil surplus will persist at least until late 2016 as demand growth slows and OPEC shows “renewed determination” to maximize output, according to the International Energy Agency.
Growth will evaporate completely early next year, with non-OPEC supply expected to fall by about 600,000 barrels per day in 2016, largely due to a decline in US shale production.
OPEC as a whole pumped more oil in November than in any month since 2008 despite forecasting little demand growth for crude next year in a bid to defend market share. The difference, or spread, between Brent and WTI should increase by 20 percent next year, with USA oil selling for about $5 per barrel less than Brent. Upon joining OANDA in 2007, he established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends.
The dollar .DXY rose for the first time in three days, making commodities denominated in the greenback less affordable to users of the euro and other currencies.
The bullion option with the highest open- interest, or the most-held by traders, gives owners the right to sell futures at US$1,000 an ounce by February.
The growth in the world’s demand for oil is set to slow next year amid an “unrelenting” oversupply of crude, according to the International Energy Agency (IEA), in a report that could pile more pressure on already tumbling oil prices.
Still, there were signs of more demand from China, the world’s second-biggest oil user.
On the New York Mercantile Exchange, WTI crude for January delivery fell 0.72% to $36.50 a barrel.
While Birol didn’t say how low he expects prices to go in 2017, he’s on the record saying he expects oil to rebound, albeit probably slowly, to about $80 per barrel in the next several years, specifically because reduced investment by oil companies should constrict supply significantly. “I think 2016 will be a year where we will have a lower price environment”. “We have downgraded our Brent oil price forecast from $54 per barrel to $51 per barrel for 2016 on the basis of a weaker end to 2015 than previously anticipated”.
Advertisement
“Markets don’t necessarily believe that there will be any cutback in production by any of the OPEC members in the very near term and that is ultimately one of the key reasons why we have seen an 8 percent drop over the last week of so”.
