United States crude prices fell below $30 a barrel for the first time in 12 years on Tuesday as OPEC member Nigeria called for an emergency meeting to address collapsing prices.
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U.S. benchmark West Texas Intermediate (WTI) for delivery in February slumped 45 cents, or 1.43 per cent, to $30.96 per barrel and Brent tumbled 47 cents, 1.49 percent, to $31.08 at around 0300 GMT.
Crude oil prices fell to their lowest in over a decade this week, trading close to $30 a barrel, and are down 70 percent since mid-2014.
In the short term, however, all eyes are on China, the world’s most ravenous energy consumer, where an economic slowdown is now crimping demand for oil products.
Oil is heading for $10-a-barrel, crashing to its lowest level in more than 18 years, another major bank has warned. Brent crude, the global oil benchmark, made modest gains before falling to $30.40 a barrel, a level not seen since April 2004.
According to Burns, because of new technology the Permian Basin has almost doubled its production in the last nine years but the demand is just not there.
But as oil prices have moved lower recently, they have seemed to drag equity markets down with them.
“Half of the current producers have no legitimate right to be in a business where the price forecast even in a recovery is going to be between, say, $50, $60”.
“Demand growth in 2016… should easily outpace capacity growth, barring a serious macroeconomic downturn”, the bank said in a January 8 note that recommended stocks of SK Innovation and Thai Oil – the leading refineries in South Korea and Thailand, respectively.
China shipped in 335.5 million tonnes of crude oil for the year, the data showed today. In 2015, China exported 2.87 million tons of crude, a rise of 377% from the year before.
The U.S. Energy Information Administration will release its weekly report on oil supplies at 15:30GMT, or 10:30AM ET, Wednesday.
Deirdre Michie, of industry lobby group Oil & Gas UK, said: ‘The plummeting oil price has impacted heavily on activity.
Airlines, big users of jet fuel, have posted record profits, and shippers and other businesses are also saving from cheaper energy. About 17,000 oil and gas workers in the USA lost their jobs in 2015, but if you include oilfield support jobs the number is about 87,000, according to Michael Plante, an economist at the Dallas Fed who has written about the effect of oil prices on the economy.
Even Saudi Arabia, whose policy of maintaining output to defend its market share even as prices slide has been blamed, together with the resilience of USA shale producers, for the persistence of the global supply glut, is feeling the squeeze.
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The latest plunge has also deepened the gap between USA states such as Alaska, Oklahoma, North Dakota, Louisiana and New Mexico, which depend on production taxes to fund education and health care and the rest of the country, which has benefited from low gasoline prices.
