An Oversupplied Market Puts Pressure on Crude Oil Prices

“The net effect of export of American oil on the market is zero”, Abdalla El-Badri, secretary-general of the Organization of Petroleum Exporting Countries, said Tuesday. He also refused to comment on whether OPEC may have to hold an emergency meeting in case prices fall further.

But it added that increases in Opec production had negated growing demand, leading to a rapid build up of oil stocks and that the trend would continue next year with only a limited pick-up in prices later.

In the United States, now the world’s biggest oil producer, congressional leaders inched closer on Monday to agreeing to repeal a 40-year old U.S. oil export ban.

“Although there are some downside risks for oil prices in the near-term, we believe that oil prices will recover in the course of 2016”, ABN Amro said. Retail gasoline prices averaged $2.01 on Monday, the lowest level since 2009, according to AAA. “And it will be vice-versa”.

But as prices have plunged and oil producers were forced to become more efficient it turned out the marginal cost of oil from shale is as low as $50 or $60. “So what we are looking at is a fair price”, he said.

“The price can drop as low as possible as we are prepared for the worst scenario”, Hossein Zamaninia said.

On December 8-9, WTI crude oil prices continued to extend losses.

Bearish sentiment remains strong, fuelled by an OPEC decision earlier in December to abandon setting a production ceiling for the oil cartel and a likely rise in supplies from Iran after sanctions are lifted following landmark deal on Tehran’s nuclear programme.

“Also where we can invest, investment to have more supplies to the consumers”.

Indeed, some banks are now holding a more bullish view on the crude market. Neither will rising demand: Moody’s forecasts that global oil demand will rise by roughly 1.3 million barrels per day in 2016, an increase from its previous assumptions as oil consumption picks up in countries such as the US, China, India and Russian Federation.

Moody’s projections are light-years from current prices.

Prices have been unstable since the beginning of the modern oil industry when Edwin Drake drilled his first successful well in Pennsylvania in 1859.

“They export some but they need to import the same quantity from somewhere else”.

A measure that would repeal the 1970s era ban on the exports of US crude oil is given a good chance of passing as part of the omnibus spending bill which is now making its way through Congress, News Radio 1200 WOAI reports.