China Has Something to Tell OPEC: Oil Prices Have Fallen Too Far

“Against the background of additional volumes of oil from Iran, oil prices are expected to remain low for a longer period than it was expected previously”, he added. Other non-OPEC members such as Russian Federation have also experienced economic turmoil and recession caused in no small part by the decline in oil prices. There has been no sign of mass short covering among speculators despite the fact that WTI and Brent prices ave both fallen nearly 12 in less than two months. Brent crude options are now even more expensive than they were before the Opec meeting on December 4 as implied volatility continues to increase.

Supporters of repealing the ban say it will return oil workers to the job in places like the Eagle Ford shale by opening new markets for the crude oil they produce.

Factors supporting a more positive outlook range from higher auto sales to heightened security and political risks in some oil producers and debt-laden shale firms on their last legs.

There’s still “upside potential” for prices because the global surplus, equivalent to about 1.5% of total supplies, isn’t especially large by historical standards, it said.

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But this chart, which comes to us from analysts at Citi, makes it clear that prices are going to have to go lower still to get production entirely halted. This is due to the advanced technology used to boost production and offset or delay the effects of decreasing rig counts. It uses its oil price forecasts to assess the creditworthiness of companies in sectors affected by oil prices.

Moody’s Investors Service on Tuesday chopped its 2016 crude oil price assumptions, citing the continued overproduction of the fossil fuel into an already glutted market.

“A fair price is the one at which our member countries can have a decent income and also where we can invest to (provide) more supply to the consumers”, said Badri, who is on maiden three-day visit to India. The only way it could be changed is if there is any collaboration between OPEC and non-OPEC on production cuts or in the event of any geopolitical flash-points which we do not hope for. “This (low oil price) will not continue”.

Market uncertainty, the credit agency said, will breed only more oil spending cuts and lower crude output in the United States, diminishing pre-tax cash flow for oil field suppliers by 20 percent next year. Demand will increase slowly but that will be counterbalanced by the overabundance of oil supply and the huge stockpile.

 At an OPEC meeting on November 28, the group failed to reach an agreement on a proposed production ceiling.