All of which puts this global slowdown in a slightly different light.
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In it’s latest short term energy outlook, the agency estimates U.S crude production dropped by 140,000 barrels per day in August compared to July. The resulting turmoil has raised the specter of the 1997-1998 Asian financial crisis, pummeling USA stocks from August into September.
In fact, the panic is something from which all global energy consumers stand to directly gain. Some experts believe the production of shale oil will increase again if the price of WTI, which is used as an global benchmark, rises above $50.
Traders are also watching out for the US Federal Reserve meeting this week to see whether policymakers would raise interest rates for the first time since 2006.
But demand for the precious metal as an alternative to the stronger dollar will be held in check.
“The supply-and-demand numbers suggest that the low oil prices are starting to have an impact on US crude oil production growth”, said Olivier Jakob, analyst at Petromatrix. The front-month European benchmark crude traded at a premium of as little as $2.09 to West Texas Intermediate, the narrowest gap since January. Just a year ago, it was hovering around $100 a barrel.
Brent for October settlement, which expires today, was US$0.27 lower at US$47.87 per barrel on the London-based ICE Futures Europe exchange. Since that drop, both have drifted higher but remained under heavy pressure.
“The oil market is even more oversupplied than we had expected and we now forecast this surplus to persist in 2016″, the New York-based investment bank said in a note to investors.
The U.S. Energy Information Administration will issue official supply and demand data for last week on Wednesday. During the summer driving season, automakers reported sales that almost doubled analysts’ expectations, putting them on course for the best sales year in a decade, according to industry research firm Autodata Corp.
Oil is down more than 25 percent from its closing peak in June on speculation the global oversupply could be prolonged.
There has even been growing competition amongst the lowest-cost producers in the Middle East, such as Kuwait and Saudi Arabia, to undercut each other with discounts for supplies to their core markets in Asia. The analyst further suggested that Saudi Arabia could produce “excessive” amounts of oil for at least two years and reach 12-12.5 million barrels per day, versus its current production of around 10.7 million barrels per day. Already, non-OPEC countries are expected to slash supply, according to the IEA.
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Clearly, opinions on the future price of oil have been fluctuating wildly. Most don’t think so. “Outside the United States, oil fundamentals appear to be slipping seasonally”, Morgan Stanley said on Monday, adding that there was potential for floating storage within the second half of 2015. “I can see the low-to-mid-$30s, but the $20s will be quite a bit of a challenge”.
