The story was not any different for the global benchmark for crude oil prices, Brent, with the front-month futures contract trading down by 77 bps at $39.80 per barrel, breaking the $40 per barrel psychological level once again.
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Soaring output from OPEC member Iraq has been a large contributor to that overhang, with production there doubling over the past decade to around 4.3 million barrels per day, more than enough to meet all of India’s daily demand.
Wall Street also opened sharply lower as crude oil prices plumbed levels not seen in seven years on growing oversupply concerns.
Brent crude for delivery in January slipped to $38.97 a barrel this morning before tracking back up to around $39. Neither EconoTimes nor its third party suppliers shall be liable for any errors, omissions or delays in content, or for any actions taken in reliance thereon.
“Lower prices are clearly taking a toll on non-OPEC supply, with annual growth shrinking below 0.3 mb/d in November from 2.2 mb/d at the start of the year”. There will be “further lay offs to come with oil at $40 a barrel”, he said.
The result is a huge global oil glut that keeps growing.
Oil futures are down more than 11% since OPEC failed to agree on output targets last week.
In its latest monthly report, the Organization of the Petroleum Exporting Countries said 2016 oil supply from outside the group will decline by 380,000 barrels per day to average 57.14 million per day.
Sustained falls in output could help to stabilise the price of oil, although some market forecasters suggest the price could continue to fall to as low as $20 a barrel. OPEC effectively dropped its production limits at its December 4 meeting, potentially bringing millions of barrels of additional oil to the market as Iran prepares to raise output once sanctions against it are lifted. If prices remain depressed, you will likely see shale producers fall another 30% from here.
Institute for Democracy and Economic Affairs (IDEAS) Chief Executive, Wan Saiful Wan Jan, said while the current low oil price was affecting the government’s revenue, it was benefitting the consumers.
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Most Asia markets also sank again on Friday at the end of a painful week for global equities defined by a commodities rout that analysts warn could continue for some time. Over the last four weeks, gasoline demand averaged about 9.2 million barrels per day, up by 0.7% from the same period past year. Analysts expect the first two quarters of 2016 to be tough but the industry looks to later in the year where demand is hoped to increase, making the next six months a time of nervous survival in the industry for key players.
