Crude Oil Prices Fall as OPEC Production Hits 3-Year Record

On Friday, Russian’s deputy finance minister issued a stark warning of United States dollars 40-USD 60 oil “for the next seven years”, Reuters reported.

Despite the lower oil price, demand in 2015 was exceptionally buoyant.

The IEA, which advises developed nations on energy, also said in its monthly report that demand growth was starting to slow.

Crude prices, whose recent heavy losses have been accelerated since OPEC last week decided against cutting its record-high output, took another tumble Friday after the International Energy Agency (IEA) said oversupply would persist until late 2016.

Crude prices have been in near free-fall the past week after the Organization of the Petroleum Exporting Countries’ meeting on December 4 failed to impose a ceiling on output, virtually abandoning price support for the market. OPEC’s decision last week “appears to signal a renewed determination to maximize low-priced OPEC supply and drive out high-cost non-OPEC production – regardless of price”.

Non-OPEC oil supply is estimated to grow by 1.00 mb/d in 2015 to average 57.51 mb/d.

U.S. benchmark West Texas Intermediate for January delivery fell to its lowest level since the beginning of 2009, losing 40 cents to US$36.76 (RM157.15) a barrel on the New York Mercantile Exchange. Since peaking above $100 a barrel 18 months ago, the front month contract for WTI crude has plummeted more than 80%.

After the “tremendous” growth of 2.23 million barrels per day in 2014, the cartel now expects growth in 2015 to have been a “much slower” 1.0 million – but up from its previous projection of 280,000 barrels.

But OPEC also struck a bearish chord by saying its group output rose by 230,000 bpd in November to 31.7 million.

“The latest OPEC meeting, which concluded by essentially saying that it’s every producer for himself, actually presents a silver lining for the oil market”, said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA.

World economic growth figures remain unchanged at 3.1 percent for the current year and 3.4 percent in 2016.

U.S. shale oil production, the main driver of non-OPEC supply growth, is expected to fall for a ninth consecutive month in January, according to a forecast on Monday from the U.S. Energy Information Administration.

OPEC continues to show strength and belief that oil prices will eventually rise and instead of selling fewer barrels of oil for higher prices. That could be a bad sign for oil demand in the world’s second-largest oil consumer, said Dimitry Dayen, senior research analyst at ClearBridge Investments, which manages $103.9 billion in assets.