The Chinese market collapse, downgrading of Brazil’s credit rating, Russian recessionary concerns, and the South African economic slowdown will curb the demand for crude oil in the long term in the oversupplied crude oil market.
“However, WTI prices below $60/b through the forecast period are anticipated to slow the rate of recovery in onshore drilling and well completion totals, despite continued increases in rig and well productivity and falling drilling and completion costs”, the EIA said. “We’re not Venezuela. Our government doesn’t tell the ships [carrying the oil] where to go”, he said, arguing those places likely would be China or other emerging Asian countries.
Goldman’s report says the world’s storage facilities for oil are nearly filled up. With production offline from two of the oil fields that Kuwait shares with Saudi Arabia in the Neutral Zone, Khafji and Wafra, due to an operational dispute, output is at a two-and-a-half year low.
Price rebounds of major commodities are expected to be limited in light of robust production.
Oil prices could plummet to as low as $20 a barrel as a massive supply glut persists until the end of next year.
Brent crude futures traded at their deepest discount to later-dated contracts since June, signaling the global oil surplus is growing more severe.
Hoeven argued the ban is hurting USA companies by forcing them to compete with one hand tied behind their back. With the rig count continuing to fall, it’s unlikely that this supply shrinkage will reverse any time soon.
Yet several banks said the immediate outlook remained weak, with Goldman Sachs and Commerzbank cutting their oil price forecasts last week.
“The market stays oversupplied, however the tempo of stockbuilds is moderating”.
“Oil from Angola has to travel through the Cape of Good Hope in Africa”, Umang Parikh, an analyst at BMI Research, a London-based unit of Fitch, said: “Iranian oil travels a much shorter distance so it has the transportation advantage”. Demand for aluminum from makers of housing materials is also weak. “Falling Cushing stocks are also putting pressure on the spread“.
Demand for platinum, used in automobile exhaust catalysts, is solid because of brisk auto sales in the U.S. But expectations of an increase in platinum exports from South Africa amid the weakness of its currency against the dollar is holding back the price of the metal. Prices tested this level in August 2015.
India sees demand for gold increase in the October-November wedding season.
But demand for the precious metal as an alternative to the stronger dollar will be held in check. “And gasoline prices are expected to stay below $3 for all of 2016”. In Brazil and other South American countries, a production shift from corns to soybean is forecast due to lower prices of corn futures on the Chicago market. The EIA estimated that production for the week came out to 9.135 million barrels per day (63.95 million for the week).