Why do oil prices keep going down? – Marcelle Arak and Sheila Tschinkel

And those US producers, which ramped up production in recent years in large part because oil prices were above $100, still haven’t backed down, perhaps encouraged by the move by Congress to allow USA oil exports for the first time in four decades.

And the strategy seems to be working, according to Luft.

Dramatic declines in crude oil prices could destabilize the global economy, but Saudi Arabia, a main cause of the oil market rout, appears determined to continue pursuing its agenda even if it means throwing other oil producers under the bus. On the same token, Saudi Arabia instead of cutting production has been pumping oil close to its maximum capacity. This week, crude fell to its lowest level in more than 11 years, while Iranian outrage over Saudi Arabia’s execution of a prominent Shiite cleric spells doom for any possible production cap deal that would have reversed the negative trend in oil prices.

Oil prices are being driven lower by fear and that fear is becoming a self-fulfilling prophecy when we talk about economic growth.

Saudi Arabia produced 10.2 million barrels per day in 2015, according to the estimates of the US JP Morgan bank.

But a Reuters ‘ survey of Middle East fund managers in December showed a more positive stance on regional equities, with many favoring the UAE, due to the global markets’ positive reaction to the Fed rate hikes and improved regional valuations.

When that impact comes, both the speed and magnitude of the fall in production may surprise many and there will be little that can be done to stop it given the massive staffing cuts at North American service and production companies and a quickly aging and under-maintained fleet of service and production equipment.

But facing an anaemic Chinese economy and abundant flows of shale oil, OPEC has lost its clout.

Consistent with these forecasts for average annual production, Iran’s crude oil production reaches 3.3 million b/d at the end of 2016 and 3.7 million b/d at the end of 2017.

Furthermore, the oil economic war in process between the different producers since more than a year has considerably affected the Saudi state budget. We can now say to emerging states “be prepared” if things will go at least for a short time, lower than anybody could conceive.

Well, it isn’t one company that owns all the oil in the world – that means that unless everyone curbs their supply to increase prices, a few of the companies that do not do so will get a “free ride” and remain fairly happy with their revenue. The problem, as I have discussed in the past, is that while the U.S.is curtailing CapEx and some production, it is being offset by production from China, Russia, and now Iran. “Don’t be misled, anybody who thinks low oil prices are the “new normal” is going to be surprised”, he said. Hence, just as the oil market collapsed when everybody was proclaiming higher prices, oil will probably stabilize sometime in 2016 as everyone expects it to keep crashing.

On the supply side, by contrast, output rose by 2.6 million bpd a year ago on top of a hefty 2.4 million bpd in 2014. Saudi Arabia and its Gulf allies are not likely to support an unscheduled meeting.

“We are consulting with various ministers of producing nations to arrange an extraordinary OPEC meeting”, said del Pino, also head of state oil company PDVSA, according to a series of tweets and comments broadcast on the company’s radio.

Jeffrey Currie, global head of commodities research in Goldman Sachs’ Global Investment Research Division, predicted oil at $20 a barrel at an oil market-related conference in London last autumn.

And so far, American oil producers are taking it on the chin.

Beyond crude oil, Iran’s condensate and natural gas plant liquids (NGPL) production is now nearly 750,000 b/d, of which 75% is condensate and the remainder NGPL.