OPEC’s failure continues to reverberate through oil market

A growing number of traders are, nonetheless, positioning themselves for notably higher prices a year from now through the purchase of bullish call options. Light Louisiana Sweet, a similar grade of crude sold on the Gulf Coast, traded at 35 cents a barrel more than Brent.

Indeed, some banks are now holding a more bullish view on the crude market.

He highlighted the squeeze on oil exporting economies, in a note today, and said that the oil exporting nations need to see crude at or around US$60 per barrel.

The glut is a result of oversupply, yet global gasoline demand has been strong, thanks to rising vehicle sales.

OPEC’s secretary general Abdullah al-Badri said the cartel could not even agree on making routine projections for oil output next year because it could not predict how much oil Iran will add to the market as sanctions are withdrawn under a nuclear deal reached with world powers in July.

“The forecast remains incredibly warm for the US That’s a large drag on demand and means less demand for distillates and more for export, which drags down the rest of the world as well”.

Iran’s crude oil exports are set to hit a six-month high in December as buyers ramp up purchases in expectation that sanctions against the country will be lifted early next year, according to an industry source with knowledge of tanker loading schedules.

Saudi Arabia, OPEC’s biggest producer and architect of the current policy, has remained opposed to a production cut unless countries outside the group cooperate.

According to wire service reports, China has planned to increase its strategic petroleum reserve by between 70 million and 90 million barrels in 2016, which will be two times its 2015 amount.

The slump has created dozens of “zombies” among shale-drillers, a term used to describe companies that have just enough money to pay interest on debt but not to drill sufficient new wells to replace older ones that are drying out.

The decrease in the growth of global demand, however, has not been met with a decrease in supply. We are now well below the $36 level, and quite frankly I think the next target will be the $35 handle. I don’t see this changing anytime soon, as economic conditions certainly don’t warrant more demand globally.

The International Energy Agency says it expects the oil glut will extend to at least late 2016, with OPEC showing “renewed determination” to maximize its production.

With oil prices now sitting at their lowest levels in nearly seven years, OPEC could be forced into emergency action in the coming weeks to help stabilise the market.