Oil prices drop after Fed holds rate

Brent crude, the worldwide benchmark, is trading at about US$49 a barrel compared with US$99 a year ago. “This is all post-Fed fallout”, Mr. Flynn said.

He adds: “The report is mixed, but generally supportive of continued accommodation, which should support equities and commodities, while weighing on the greenback and the yield curve”.

USA crude production dropped by 18,000 barrels a day to 9.1 million last week, the Energy Information Administration reported Wednesday. The gap between supply and demand will continue to put pressure on the crude oil prices.

Kuwait’s perception was supported by other sources at OPEC saying that oil prices are expected to increase by no more than $5 a barrel a year and will reach $80 by 2020.

Fast forward to the present scenario and Goldman Sachs has painted a rather sober picture of the price of crude in the next few years. Global markets could be hit by the lifting of sanctions before Iran starts pumping more oil. And even if the price rises, industry experts say USA production quickly could ramp up and keep prices low for years to come, challenging the power of OPEC.

Accordingly, a rate hike, which could have resulted in much lower crude oil prices, would have been much more beneficial for the airline industry.

There’s less than a 50 percent chance that prices will drop to $20 a barrel, most likely when refineries shut in October or March for maintenance, Jeffrey Currie, head of commodities research at the bank, said in an interview in Lake Louise, Alberta. Goldman Sachs is forecasting long-term crude prices at around $50/bbl.

Investors have been fixated on China in recent months as worries about an economic slowdown in the world’s second biggest oil consumer spooked markets, still reeling from oil’s yearlong price rout. Since the oil and gas companies have been aggressively slashing their capital expenditure on exploration and drilling activities, energy services companies such as Schlumberger (NYSE:SLB) and Halliburton (NYSE:HAL) have seen a meaningful decline in their contract backlogs.

Al-Nasser has been in place as the interim CEO after replacing Khalid Al-Falih who became chairman of Saudi Aramco and moved to a government role as health minister.

Producers can only hope that this will translate into stronger growth in demand that might eventually eat into stockpiles and strengthen the price.