Tumbling oil prices fall to 12-year low

U.S. West Texas Intermediate crude (WTI) was up 88 cents at $31.32 a barrel, recovering from Tuesday’s dip below $30.

The declines aren’t as steep as on prior days this year, but what’s significant is the new move toward $ 30 per barrel oil – with WTI crude breaking briefly below $30 at $ 29.93 before closing at $ 30.44 on the New York Mercantile Exchange.

Oil prices are unlikely to rise above an average of $40/bl this year, putting additional pressure on governments and energy companies to cut their capital costs further, according to 51% of respondents to a GI Survey of 250 energy industry professionals operating in the UAE.

Some OPEC nations also reportedly are mulling whether to hold an emergency meeting of the 13-nation Organization of the Petroleum Exporting Countries to weigh changes in production.

China seized the chance to add up to 147 million barrels to its reserves in the first eleven months of 2015, according to Reuters calculations, following a more than 50 per cent slump in oil prices since mid-2014.

Compounding this, analysts say that the robust dollar has been playing an increasing role in crude price falls since last November. Traders fear that China’s economy, the world’s second-largest, is slowing down.

The stock and oil markets have been moving in tandem as unusually low oil prices have been devastating to the bottom lines of the energy sector. Both Brent and USA crude pared losses, rising some 30 cents in the few minutes on the release of the data.

But with major USA energy lender Wells Fargo estimating that sustained prices below $40 per barrel, let alone $30, are too low for US shale producers to survive in the longer run, the stakes are exceptionally high for the young industry that turned the United States into a leading oil and gas producer. BP said it would axe 4,000 jobs globally and Petrobras slashed its five-year investment plan by 24.5 percent.

The starting point for any sensible discussion about the 75 per cent collapse in the oil price over the past two years is to put it in the context of previous sell offs.

Standard Chartered stressed that it believes the depressed prices are supported by overly negative market sentiment, not fundamentals.

Lower crude oil prices typically translate into lower fuel prices for drivers.

The global oil market is bracing for Iran to deepen the supply glut by pumping lots more oil very soon.

Prices plummeted 10 percent last week as investors grow concerned about the global supply glut and weakness in key market Chinese, which is the world’s biggest energy user.

Nevertheless, projected future oil prices – reflected in forward curve – have shifted downward across all time periods onto year 2021. In Eau Claire, the price was $1.75 at most stations Tuesday.

Crude stocks at the Cushing, Oklahoma, delivery hub for WTI fell by 302,000 barrels, the institute said.

“The US$20 number is something you have to talk about”, Ed Morse, the global head of commodities research at Citigroup, said on Tuesday in Calgary.