Oil up 2% on North Sea Storm; rig count falls by 2

Crude prices dropped a whopping 35 percent previous year and are hovering around $37 a barrel.

The gap between Brent and WTI has shrunk amid speculation the removal of a 40-year ban on USA crude exports may ease the nation’s oversupply. Brent was down $1.34, or 3.5 percent, at $36.44 a barrel.

Iran has been widely expected to sell hundreds of thousands more barrels of crude oil next year as worldwide sanctions are lifted as part of a nuclear deal.

Futures have lost 32 per cent this year, poised for a second annual loss that exceeds the magnitude of the slump during the Asian economic crisis from 1997 to 1998.

Elsewhere, on the ICE Futures Exchange in London, Brent oil for February delivery tacked on 26 cents, or 0.71%, to trade at $36.72 a barrel.

“There’s a lot of oil in tanks and we will have to see stockpiles start to decline in a major way before prices recover”, said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts.

Heavyweight broker Goldman says the price may go as low as US$20 for production to be scuppered and allow a rebalancing of the overcooked market to happen.

Oil is under pressure because of a growing global glut.

Saudi Arabia is planning for lower oil prices next year after delivering a budget plan earlier this week that aims to boost non-oil revenues and cut spending, Razaqzada said. And our predictions are that oil inventories in Asia are going to get closer to saturation in the first quarter. “The hope for a rebalancing in 2016 continues to suffer serious setbacks”, it said. The bank cited ongoing increases in available global supplies, despite some cuts by United States shale drillers in particular, as well as a slowdown in demand, as the main reasons.

Brent prices briefly fell below $36 per barrel this year, effectively wiping out the gains from a decade-long commodity super-cycle sparked by China’s unprecedented energy demand boom. Oil began falling in mid-2014 as surging output from the Organization of the Petroleum Exporting Countries (OPEC), Russia and U.S. shale producers outpaced demand.

The downturn in oil has caused pain across the energy supply chain, including to shippers, private oil drillers and oil-dependent countries from Venezuela and Russian Federation to the Middle East. The group has pumped more than 30 million barrels a day for 19 months.

In cases with relatively modest growth in USA crude production, such as the HOGR (high oil and gas resources) and LP (low oil price) cases, production isn’t high enough to require a reduction in domestic crude oil prices to lower domestic production and widen the Brent and WTI price spread. The downturn gained pace at the end of 2014 after a Saudi-led OPEC made a decision to keep production high to defend global market share rather than cut output to prop up prices.