Opec output hit 3-year high in November

Oil prices have slumped to levels not seen since the global financial crisis as a result of OPEC’s strategy to defend market share against higher-cost producers.

The OPEC Reference Basket declined around 10 percent in November as lower refinery crude intake added to the oversupply in the market, according to OPEC monthly oil market report for December.

Overnight in New York, West Texas Intermediate crude oil futures fell to a new low seven-year low of about $36.13 per barrel. Many in the market are hopeful that the next report from a major producer or one of the governmental energy agencies will show the turnaround is starting, but Friday’s IEA report is just another sign it is not, he added.

Brent for January settlement slid 4.5 per cent on the London-based ICE Futures Europe exchange on Friday, and contributing to a 12 per cent drop on the week.

It is not possible nor practical for oil prices to fall below 40 a barrel.

The Organisation of the Petroleum Exporting Countries reported its collective production rose by 230,100 barrels a day in November to 31.7 million.

Still, the unrelenting low oil prices have prompted some US shale producers to turn off their taps, though not enough to rebalance the market, analysts said.

World oil demand is anticipated to have risen 1.53 million barrels per day in 2015 to average 92.88 million, it said.

OPEC’s production, excluding output from Iraq, fell slightly for the month. The difference, or spread, between Brent and WTI should increase by 20 percent next year, with USA oil selling for about $5 per barrel less than Brent. This leaves the United States caught betwixt low energy prices which should well boost economic expansion…while global economic weakness and a stronger dollar provide headwinds. That is 900,000 barrels a day more than in May 2015 and more than 2 million barrels a day more than at the end of the third quarter past year.

“We are in favor of, not a cut, but of countries not increasing their output, so that demand, which is growing year-by-year, is covered by the oversupply that exists in the market”, Novak said, according to a report by the Prime news agency.

“Last week’s decision by OPEC not to change policy and to keep pumping as much oil as they could in a dismal fundamental picture continues to drive prices lower”, he said. “There is unlikely to be any kind of “happy ending” for oil prices this year”. Analysts expect the first two quarters of 2016 to be tough but the industry looks to later in the year where demand is hoped to increase, making the next six months a time of nervous survival in the industry for key players.

“Prices are going to continue to head lower without any significant weather demand on the horizon”, said Tom Saal, senior vice president of energy trading at FCStone Latin America LLC in Miami.