Moody’s lowers oil forecast for 2016 by $10 a barrel

Global oil prices have fallen below $40 per barrel for the first time since late 2008 after the Organization of the Petroleum Exporting Countries (OPEC) failed to agree on a production ceiling earlier this month.

On Tuesday, London-traded Brent tacked on 57 cents, or 1.49%.

Indeed, some banks are now holding a more bullish view on the crude market.

At the meet, India asked Opec for a reasonable oil pricing.

Terry Marshall, a senior vice president at Moody’s, said: “Increasing consumption will not match the increase in supply”.

The glut is a result of oversupply, yet global gasoline demand has been strong, thanks to rising auto sales.

However, analysts remain split on how quickly more Iranian exports will hit the market.

Even European vehicle sales are growing, with Western European markets up 5-10 percent, according to monthly industry data.

The U.S. restriction on crude exports was established during the energy supply shortages of the 1970s. Outside OPEC, Russian production is also showing no signs of slowing. The U.S. Energy Information Administration (EIA) also reports that investment in global oil output has already dropped around 25 – 30% over last year and is predicted to continue to fall next year which will mark the first time in two decades when investment declined for two consecutive years.

The slump has created dozens of “zombies” among shale-drillers, a term used to describe companies that have just enough money to pay interest on debt but not to drill sufficient new wells to replace older ones that are drying out.

Futures were down 0.7 per cent in NY after earlier falling as much as 1.7 per cent. Congressional leaders agreed on a fiscal plan that would avert a government shutdown and lift restrictions on shipping domestic crude overseas, House Speaker Paul Ryan told fellow Republicans.

“I believe that 2016 is not going to be any better than 2015 with an average of $50 at the most unless OPEC takes action to decrease production, which is unlikely”. The Persian Gulf nation has staunchly defended its right to restore output even as a global oversupply sends crude below $40 a barrel.

“Almost the entirety of added supplies in 2016 will come from Iran, Iraq and Saudi Arabia”, Morgan Stanley analysts said in a research note Monday, adding that OPEC’s supply is likely to increase by a million barrels per day next year.

Such a price would support some development of the world’s most expensive oil- from oil sands and deepwater resources-in an environment where development costs are lower than in recent years, the report said.