Moody’s sharply cuts 2016 oil price forecasts

“We are seeing nothing unusual about this week’s price bounce given the fact that the entire complex had become much oversold based on virtually all of our technical indicators”, Jim Ritterbusch of Chicago-based oil consultancy Ritterbusch Associates said in a note.

Iranian crude exports have been restricted to about 1 million barrels per day since 2012, down from a high of 2.5 million barrels per day.

The dollar was also near a seven-week low against a basket of currencies, encouraging the purchase of dollar-denominated oil contracts. A fall below $36.20 would take oil down to levels not seen since 2004. The Organization of the Petroleum Exporting Countries, whose 13 member nations produce about 35 percent of the world oil supply, has effectively abandoned oil production quotas, adding to the world oil glut.

It revised its forecasts after oil prices fell below $40 a barrel this month, after Opec stuck by its strategy of pumping more oil to hold on to its share of the market and, it hopes, weaken smaller United States producers.

Traders said that the low prices were a combination of structural oversupply and seasonal price weakness.

“World oil markets will remain over supplied at least until late 2016”, the IEA said in its monthly report, tempering the gloomy outlook by adding “the pace of global stock builds should roughly halve next year”.

Oil prices fell for a seventh straight session on Monday, coming close to 11-year lows, on growing fears that the global oil glut would worsen in the months to come.

Dubai crude, the benchmark for the Asian market, dipped to $33.50, the lowest in 11 years.

In addition to low oil and gas prices, the sector’s decline has also been attributed to reduced production.

In October, inventories in the Americas, Asia and Europe stood at 4.4 billion barrels according to Energy Intelligence, compared with 3.8 billion-3.9 billion barrels in the last five years.

“The upshot is that strong demand growth and falls in non-OPEC supply should help to reduce the surplus now in the market”.

In 2016 average price for Brent oil is expected at $43 per barrel, and for WTI at $40 per barrel.

The price of Brent crude oil opened today at $39.55, but saw its price slip to a day low of $38.90 – the furthest the commodity has fallen seen since December 2008.