Oil edges up as multi-year lows trigger buying

The ratings firm cut its forecast for US crude from $48 to $40 a barrel in 2016, and said independent oil companies’ pre-tax cash flows will likely fall 20 to 25 percent next year as oil-price hedges roll off. I saw six cycles – I saw very high price[s], I saw low price[s] and this is one of them.

 “OPEC’s strategy seems to be working”, writes The Atlantic’s Bourree Lam. “Low oil prices have already led to rig closures across America, and it’s expected that high-cost oil-production (the sort that is common in the US) will be the first to be edged out of the market altogether”.

However, OPEC secretary general Abdullah al-Badri said that the current low prices will not continue for a long time and will rise in the coming days.

Brent crude fell by 4pc to below $36.40 a barrel for the first time since December 2008, trading just 14 cents above the lows last seen during the 2008 financial crisis of $36.20 a barrel. OPEC decided at its semi-annual meeting on Dec 4 not to cut its 30-million-barrel a day production quota, even as energy prices have more than halved since their peak in June 2014.

Prices have fallen more than 60 percent from levels above $100 in June past year owing to slack global demand and a slowdown in key markets including China.

Oil touched seven-year lows earlier this week amid signs that the global oil glut, which has battered the market since last year, is far from abating.

“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.

“Opec oil producers continue to produce without restraint as they compete for market share, exacerbating the now saturated markets”, said Moody’s senior vice president Terry Marshall.

Tuesday’s price gains are likely also due to traders who had bet on lower prices closing out positions to lock in profits, analysts said.

LONDON-Oil prices fell Wednesday as investors await the U.S. Federal Reserve interest rates decision and data expected to show another increase in U.S. stockpiles. – Reuters pic, December 16, 2015.United States oil prices may fall into the US$20s if tanks used to store crude start to fill up before producers sufficiently curb output, Citigroup Inc predicted.