Crude oil prices plunge to fresh 7-year lows
Brent for January settlement dropped 38 cents, or 1 percent, to $39.73 a barrel on the London-based ICE Futures Europe exchange on Thursday, also the lowest close since February 2009.
Gasoline’s premium to heating oil widened as the heating oil contract HOc1 slumped 6 percent to near 7-year lows while gasoline RBc1 settled flat.
The group is battling for market share with other oil producers including the United States and last Friday decided against cutting output despite plunging prices, weak global demand and the supply glut.
The IEA noted that “there is evidence the Saudi-led strategy is starting to work”. Exxon Mobil Corp., the world’s biggest oil company, has lost $11 billion of its value and PetroChina Co. more than $16 billion, according to data compiled by Bloomberg.
Oil declined to its lowest level since 2008 as analysts warned that global oversupply will persist into 2016.
The OPEC decision last week has sent oil to around seven year lows, and with the global economy struggling, China’s growth subdued and the dollar tipped to strengthen further, the commodity is expected to remain beaten down until possibly 2017.
The Organization of Petroleum Exporting Countries, by effectively dropping production limits at its December 4 meeting, is displaying hardened resolve to maintain sales volumes even as prices fall in an oversupplied market, the agency said Friday in its monthly report.
In fact the IEA sees China’s overall oil demand to increase by 100,000 barrels per day to an average of 13.0 million barrels per day, driven by demand for more petrol.
“Oil prices haven’t stabilised yet so we can easily enter a wait-and-see mood”.
Just as global oil demand growth was showing signs of a slowdown, the global oil supply inched up in November, according to the IEA, to reach 96.9 mb/d “on slightly higher OPEC crude output”.
Demand growth will likely slow to 1.23 million bpd in 2016 from a five-year high of 1.79 million bpd in 2015 as support from sharply falling oil prices begins to fade.
The trigger was a meeting of oil producers’ cartel Opec late last week, which broke up in disarray as the member countries failed to agree to put a lid on production.
“The idling of rigs drilling for oil in the USA will accelerate and the number of uncompleted wells will increase”.
There are also broad concerns about growth, especially in emerging markets, which in previous years have driven demand growth in raw materials. The group, which gave up individual production quotas several years ago in favor of an aggregate production ceiling, appeared to have largely done away with those restraints, as well.