Crude oil is sliding to new lows

“While U.S. crude oil production this year is expected to be 100,000 barrels per day less than previously forecast, oil output is still on track to be the highest since 1972″, said Adam Sieminski, Administrator with the EIA.

Prices had edged higher from six-year lows yesterday on news that US crude supplies fell – a sign of stronger demand- and the dollar declined.

The cartel also stuck to last month’s prognosis that demand growth in 2016 would reach 1.34 million barrels per day, thanks to global GDP expansion set to reach 3.5 per cent, up from 3.2 per cent this year.

U.S. crude neared its lowest for 2015 on Thursday after refinery outages and data indicating a large build at the key U.S. delivery point for oil heightened worries about a global supply glut.

“The mood in oil is very weak”, said Phil Flynn, senior account executive at brokerage Price Futures Group in Chicago. Brent futures were trading at US$49.21 a barrel, down 1 cent from their last settlement but still some way off from their 2015-low of US$45.19.

Gundlach’s commentary – which spoke more to the geopolitical rather than market implications of low oil prices – was re-circulated by traders and strategists this week as markets look for almost anything to use a guide post for what happens next with oil prices approaching their financial crisis nadir.

Falling margins at Asian refineries have led Chinese and Korean refiners to cut production, thus lowering their demand for crude oil. Middle East country like Saudi Arabia along with other OPEC nations continues to extract oil at high levels and Iranian oil will make a comeback after being banned by sanctions.

“We are in the camp where prices will retest and fail to hold support at these levels”, said Chris Jarvis of Caprock Risk Management in Frederick, Maryland.

Although analysts noted that China’s overall currency fall was relatively low by historical standards in foreign exchange markets, they were quick to add that China’s case was different.

China hopes devaluing the yuan will boost exports from its economy, which has slowed well below the growth targets set by the government.

“There’s still no big change to the supply and demand fundamentals in the oil market”, he told AFP.