Oil prices are continuing to drop, heading towards lows last seen more than a decade ago before the super cycle momentum higher. The ongoing battle of production and rhetoric between OPEC members continues to weigh on crude oil price. Brent plummeted below $37.00 per barrel after reopening at $37.90 on Monday while West Texas Intermediate crude mirrored the move, dropping from $35.66 to below $35.00 in a growing sign of capitulation in the energy sector. Since OPEC abandoned production quotas, Brent has fallen each subsequent session. With the Iranian Deputy Oil Minister Amir Zamaninia reiterating that there is “absolutely no chance” the nation will delay or cut back in production for oil, the stage is set for further declines as supply outpaces demand further. According to the Deputy Minister, Iran has already secured export customers once sanctions are lifted in the first week of January. The country is estimated to have pumped approximately 2.80 million barrels per day last month, an amount expected to rise further in 2016.
OPEC has been pumping near record levels since last year in an attempt to drive higher cost producers and tight oil plays in the US and Canada out of the market. The supply glut is further evidenced by the near record refinery output with China showing substantial processing production gains after some refineries completed seasonal maintenance measures. The most recent 6.20% month over month uptick recorded in industrial production is mainly attributed to rising refinery rates. China, the world’s second largest oil consumer, recorded crude oil refinery output averaging 10.73 million barrels per day during October, a marked improvement over the last report in June which saw production at 10.59 million barrels. According to the International Energy Agency, the oil glut will persist up until the end of next year as output and refining continue to expanding on an aggregate basis despite steady demand which is forecast to contract. Nosediving oil prices has generated a degree of uncertainty across financial markets, but the turmoil should not obstruct the FOMC from hiking interest rates on Wednesday.
Oil Hits New Multi-Year Lows
Andamento del mercato - 14/12/2015