Oil has shed 20 percent so far this year and 72 percent since mid-2014.
Advertisement
Oil traders have been in for a crude awakening as the price of oil continued to plunge yesterday, dipping below $30 a barrel for the first time in more than a decade.
“A marked deterioration in oil market fundamentals in early 2016 has persuaded us to make some large downward adjustments to our oil price forecasts for 2016”, Barclays bank said. Not to be outdone, Royal Bank of Scotland said $16 is on the horizon, comparing the current market mood to the days before the implosion of Lehman Brothers in 2008.
It’s a big mystery just how much oil Iran will be able to pump, but it’s unlikely the country will back down despite the price crash.
Oil has dived close to $30 (A$42) on abundant crude supplies, as OPEC member Nigeria called for an emergency meeting to address collapsing prices that have ravaged revenues. “And in panic you can get an egregiously lower price”, he said.
Oil saw renewed pressure as the dollar rose against rival currencies (http://www.marketwatch.com/story/dollar-rises-as-china-intervenes-to-support-the-yuan-2016-01-12).
OPEC’s strategy of maintaining production levels, instead of reducing supply to allow prices to recover, has been aimed at defending market share at the expense of higher-cost producers such as those in the USA shale sector. February Brent crude on London’s ICE Futures exchange dropped 69 cents, or 2.2%, to finish at $30.86 a barrel, the lowest finish for the global benchmark since April 2004.
Moore says workers getting laid off could become more common over time but those who stay will continue to help grow the market, “People who survive will emerge stronger and smarter”.
“Strong 2015 imports largely reflect China’s crude inventory buildup, including for the strategic petroleum reserves, and high refinery runs on low oil price incentives”, analysts at Barclays said in a report.
On Tuesday the Energy Department lowered its expectations for crude oil and most fuels for this year and next.
EIA estimates total USA crude oil production in December fell 80,000 bpd from November.
The market is also bracing for new crude supplies from Iran once Western economic sanctions on the country are lifted under a deal struck previous year to curb Tehran’s nuclear programme.
On the North Sea, “there is a standstill in the new project launches which may create a hole in the pipeline of projects next year”, said Florent Maisonneuve, managing director and co-head of Oil & Gas at AlixPartners in Paris. Oil produced in Saudi Arabia and Nigeria which were main exporters to the US, is now competing in Asian markets.
“Any slowing in the rate of demand growth could delay the timing of rebalancing and ultimately a price recovery”, they said in a research note.
Advertisement
US oil prices will hold below $50 a barrel on average this year and next, government forecasters said Tuesday.
