Moody’s lowers its forecast on Brent oil price for 2016

“The fact that Brent crude has fallen into the $36-$38 range, having broken through the $40 point to multi-year lows, means that we are now seeing sub-£1/litre petrol at many forecourts”.

Brent and U.S. crude’s West Texas Intermediate (WTI) futures rose for a second straight day on short covering, after being unable to break below a seven-year trough.

Both benchmarks fell to their lowest intraday level since the financial crisis on Monday. On Tuesday the contract closed up 53 cents at $38.45 a barrel in its first gain in eight days.

“We read any lifting of the U.S. export ban as a significant structural change…Lifting the ban could help to clear USA crude oil stocks”, said Olivier Jakob, an analyst at consultant Petromatrix.

In the past, whenever oil experienced major sell offs like the one it is now enduring, prices have been supported by production cuts by OPEC. “Most of the negative news already appears to be priced in”, said Commerzbank in a note. The US energy Information Administration (EIA) will release the inventories data of last week on Wednesday.

In the United States, congressional leaders inched toward agreeing to repeal a 40-year old USA oil export ban that could alleviate pressure on oil storage in the world’s biggest producer.

The Organisation of Petroleum Exporting Countries (OPEC) does not expect the low crude oil prices to continue beyond a year.

According to Commerzbank, the spread between the two benchmarks, now less than a dollar, must at least cover the costs of transport by pipeline from the Midwest to the U.S. Gulf Coast for U.S. oil to be of any interest to Global consumers.

Even plummeting USA rig counts haven’t stopped the crude price free fall. Traders and analysts were nearly unanimous in their opinion that the market would go even lower.

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.

Of course, lower oil leads to lower gasoline prices, so not everyone is upset at the low price of oil. Chinese demand has been a bright spot for the glutted oil market, and concerns about a slowdown in the No. 2 oil-consuming nation have been a factor weighing on prices this year. Diesel futures rose 1.9 cents, or 1.7%, to $1.1467 a gallon.