“$1.5-trillion of uncommitted spend on new conventional projects and North American unconventional oil is uneconomic at $50 a barrel“, Woodmac added. In July, however, Federal Reserve Chair Janet Yellen said the Fed would raise rates this year if economic conditions improve as expected.
“Indeed, the Fed’s hesitancy only appears to have reinforced investors’ worries about the global economy, rather than reassure them”, Capital Economics said in a commentary.
Oil is down more than 20 per cent from this year’s closing peak in June amid a persistent global oversupply. In the time since, the country has been split between warring militias and rival governments, but a possible peace deal could see production ramp back up to as much as 1 million barrels of crude oil a day, Citi Investment Research said Tuesday.
Falling share prices on Wall Street which have provided guidance to oil of late also pressured crude futures along with reduced political tensions in the Middle East from US-Russia talks on Syria. US benchmark crude West Texas Intermediate (WTI) was trading at $46.69 a barrel Thursday at 11:56 a.m. EDT.
Brent crude was down $0.15 at $48.93 a barrel at 11am GMT, after touching an intraday high of $49.75. It may be able to let off and let oil prices rise in a year or two, but by then, it could break a lot of the USA shale business.
“Oil is caught between the upside that comes from a weaker dollar and the downside to demand from declining global growth”, said David Hufton at brokerage PVM. However, the reason for no rate rise might be even more bearish for commodities as an asset class. China is the demand side of the equation in the world of raw materials.
In the first seven months of the year, China purchased about half a million barrels of crude in excess of its daily needs, the most for the period since 2012, according to data compiled by Bloomberg. A rate hike is widely viewed as bullish for the dollar. But given that markets are awash in crude, a drop in output would actually bolster oil prices.
Those oil-rig reductions suggest a decline of more than 250,000 barrels per day (bpd) in US crude production between the second and fourth quarters of this year, Goldman Sachs said in a report. Prices could test the nearest support of $38 per barrel. US production could sink by the most in 27 years in 2016 as the price rout extends a slump in drilling.
We are concerned that lifting the crude oil export ban could harm USA consumers, businesses and our national security, and we urge President Barack Obama to pay close attention to these adverse impacts that could result from any efforts to repeal or weaken this longstanding USA law.