Oil prices hit fresh lows, dragging markets along

“The market is fully acknowledging that OPEC is no longer in price-control mode or providing a floor, and that the group is unlikely to change that strategy any time soon”. It the Brent crude drops lower than that it will reach a level that has not been noted since the mid 2004.

Oil prices were mixed in Asian trade on Tuesday after rebounding from sub-USD 35 levels in NY, but traders were braced for more downward pressure ahead of an expected hike in USA interest rates. Crude, priced in US dollars, typically falls as the dollar strengthens since it becomes more expensive for buyers paying in other currencies.

The Indian basket, comprising 73 percent sour-grade Dubai and Oman crudes, and the balance in sweet-grade Brent, plunged to $34.39 on Monday for a barrel of almost 160 litres, as per data compiled by the state-run Petroleum Planning and Analysis Cell. This comes as global energy markets are battling with a persistent supply glut, which triggered a slump in oil prices in the summer of 2014.

OPEC Secretary General, Abdullah al-Badri, said on Tuesday that current low oil prices would not continue and may rise in a few months or a year. 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.

US producers, meanwhile, are clinging to the hope that crude prices can eclipse the so-called “shale band” above $60 a barrel over the next year, allowing them to pump oil at a higher rate.

Low oil is terrible news for companies that produce oil, but the resulting low gasoline price is great news for each of the following companies, all of which I consider to be must-have stocks while gasoline remains low.

Back on Nymex, January natural gas fell 7.2 cents, or 3.8%, to end at $1.822 per million British thermal units-the weakest level in more than 16 years.

OPEC supply is likely to increase by 1 million bpd next year, Morgan Stanley analysts said in a research note on Monday.

Schneider Electric energy industry analyst David Hunter said: “The recent dip in oil prices is significant enough to suggest that the market is spooked by Opec’s meeting last week and there could be further reductions to come”.

In November, OPEC production rose by 230,000 barrels per day from the previous month to average 31.70 million barrels per day, according to OPEC’s monthly oil market report released on Thursday.