Oil Prices Plummet As Investors Brace For Flood Of Iranian Crude

The failure to agree production levels means OPEC core members are readying for new battles for share in the market already heavily oversupplied and consuming nearly 2 million barrels per day less than it is producing.

Finance Minister Seth Tekper during his presentation of the 2016 budget statement in November, 2015 said government had pegged its bench mark projection for a barrel of oil at 53.05 dollars for next year in line with the International Monetary Fund (IMF)’s. OPEC is setting aside its output quota of 30 million barrels a day, a target it’s breached the past 18 months, until members gather again in June.

“As a result of the collapse in oil and gas prices today, the market is anxious that you’re going to see less capital spending, you’re losing a lot of a good-wage jobs in the oil patch, and people are worrying that we’re going to see a snowball of defaults among high-yield energy issuers”, said Scott Wren, senior global equity strategist at Wells Fargo Investment Institute in St. Louis.

USA crude fell $2.32, or 6 percent, to close at $37.65 a barrel on the New York Mercantile Exchange, its lowest price since February 2009.

Oil prices hit a near 7-year low Monday, after overproduction problems.

Over the previous year, OPEC production has been around record highs at 31.5-M BPD following a strategy by Saudi Arabia to ramp up output in an effort to squeeze out higher priced United States shale and deep water producers. “Any tiny risk that Opec actually might do something in the next six months is completely off the table after Friday’s meeting”, said Bjarne Schieldrop, an oil analyst at SEB in Oslo.

“The OPEC decision could probably support Indian rupee in the short term, which has been under relentless pressure from foreign institutional investors who have consistently been net sellers in Indian equities lately”, said analyst Anand James of Geojit BNP Paribas. Brent oil fell to just above $38 per barrel in December 2008.

American motorists are feeling the benefit at the pump, with the average price of a gallon of gas also falling to its lowest level since 2009. Gains were limited by the overall decline in commodity prices and the fear of deflation because of the steep drop in oil prices.

He predicted that oil balances are set to improve in the second half of 2016, with the combination of global demand and lower non-OPEC output potentially pushing crude oil back up to 55 dollars per barrel.