On Tuesday, the price of United States Oil Fund LP (ETF) (NYSEARCA:USO) recovered slightly from its 12-year low on the back of higher demand for oil from China.
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London Brent oil also skidded to $27.10 – the lowest level since November of the same year. It asked whether crude prices could go any lower. The country now produces 2.8 million bpd and exports just over a million. “I don’t know but certainly I would bet that it is going to be higher than where we are today”.
The figure is planed to rise by another 500,000 to two million barrels per day within a six month period at the next step.
The Saudi-backed strategy is also aimed at pressuring non-OPEC member Russian Federation – the biggest global oil producer – and force fellow OPEC member Iran to trim output. While that’s below official ministry plans to add 1 million a day by mid-year, it could still be enough to pressure prices further, the agency predicted. Speaking from the World Economic Forum in Davos, Switzerland, Chinese Vice President Li Yuanchao said that, despite a modest slowdown, the nation’s economy was still outperforming many of its peers.
Venezuela is one of the so-called Fragile Five OPEC members most at risk from significant instability amid the turmoil in prices, according to RBC Capital Markets.
This supply-demand imbalance, combined with suppressed commodity prices, was the flawless cocktail for a surge in prices as the “fracking miracle” came into focus.
Russian Federation was among the hardest hit this week, with its ruble currency slumping to a record low against the dollar.
Therefore, with the prospect of increasing supply in the short run, a lower oil price is on the horizon.
On Wednesady, Saudi Arabia’s Foreign Minister Adel al-Jubeir denied allegations that Riyadh intentionally drives down global oil prices by refusing to cut production. Indicating the glut may grow further, Iraq’s Oil Minister Adel Abdul Mahdi told Reuters the country’s southern region planned to increase output by up to 400,000 barrels per day (bpd) this year to over 4 million bpd. At this point, consolidation, reduced production and a rising oil price are likely.
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Even as prices rose, Moody’s Investor Service analysts placed the credit ratings of 120 oil and gas companies worldwide on review for downgrade, signaling the deepening financial troubles for a sector that could face many bankruptcies in 2016. Venezuela is now undergoing its worst recession since the 1940s and the same can be said of other members whose economy is shrinking as a result of the persistent fall in the price of oil. Oil and oil product storage tanks started to fill, and they’re now full to the brim.
