US crude West Texas Intermediate (WTI) were trading at $31.34 per barrel at 0805 GMT on Tuesday, down 7 cents from their last settlement and nearly 19 percent lower than at the beginning of the year.
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Put positions tied to a $20 strike price in December Brent crude oil futures have risen more than 700 per cent since the start of the year, and WTI put open interest is up more than a third at the March $20 strike.
The growing number of mid-sized independent Chinese refineries, known as teapots, which are eager to capitalize on the still-healthy refining margins would want to import more crude now before prices rebound, analysts said.
A Royal Bank of Scotland analyst also warned that stock markets could fall 20 per cent this year following turbulence in China and warned investors to “sell mostly everything”.
Nigeria, a member of the Organization of Petroleum Exporting Companies, called for an emergency meeting on the sinking prices on Tuesday.
Members of OPEC, meanwhile, are refusing to cut back on production for fear of losing their share of the market to non-members like the US and Russian Federation.
London-listed energy giant BP had already slashed 4,000 jobs past year as it prepared for a prolonged period of low prices. “Fundamentally, oil prices have overshot to the down side”.
Supplies at Cushing, Oklahoma, the delivery point for NY futures and the biggest U.S. oil-storage hub, declined by 300,000 barrels last week, the API said on Tuesday, according to a person familiar with the figures. “However, for prices to get this low the pound would have to get no weaker against the dollar than it is today”, he added. Prices reached a 12-year low on Monday.
The analysts argue that while the global supply glut has dragged oil below $60 per barrel, the stronger dollar accounts for the difference between a $35 per barrel and $55 per barrel price.
A stronger dollar has also pressured the energy complex.
Energy companies expanded as oil topped $100 a barrel in 2008 and stayed there during the early part of this decade, but prices have plunged over the past two years because of high supply and weakening demand.
Iran will export an additional 500,000 barrels of oil a day after sanctions are lifted under the July nuclear agreement and begin selling another 500,000 bpd six months later, he said earlier this month. A little demand positivity came via a surge in China’s imports to a record 334 million tons a year ago, thank to the price crash.
Oil price recovered modestly to the high 30s – low 31s, after dipping under $30 for the first time since 2003.
Crude oil declined 3% on the day to settle at $30.44 a barrel, marking its seventh day in a row of losses. The glut has also been caused by falling demand for oil due to China’s slowing economy.
“I am not convinced that OPEC alone can unilaterally change this strategy just because we have seen a low in the market”, he said.
Russian Federation has based its budget this year on an average oil price of $50 per barrel, and the government has indicated it is prepared to make spending cuts across the board to deal with the slump. They want to edge out shale gas producers in the United States, and they have been trying to achieve that goal by pumping oil at a very fast clip.
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Futures rose as much as 2.2 per cent in NY, after dropping 3.1 per cent on Tuesday.
