Oil Prices Slightly Higher on US Oil-Rig Decline

Net-net, the movement in the price of barrel Brent crude for October delivery was downwards – but only marginally (22 cents) to US$49.51. The gap between supply and demand will continue to put pressure on the crude oil prices.

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“The price decline is partly due to the U.S. stock market performance last night and partly due to the generally bearish fundamental picture”, said Tamas Varga, oil analyst at brokerage PVM Oil Associates in London.

The oil price remains range bound below the US$50 mark as investors and producers nervously watch the market. Prices tested this level in August 2015.

“Oil is caught between the upside that comes from a weaker dollar and the downside to demand from declining global growth”, said David Hufton at brokerage PVM. Brent costs have been at $48.93 per barrel, down 15 cents. And even if the price rises, industry experts say USA production quickly could ramp up and keep prices low for years to come, challenging the power of OPEC. This includes losses of more than a quarter since June this year as a sharp slowdown in China has sparked concern over the health of the world economy. Iran’s deputy oil minister Rokneddin Javadi was quoted as saying the country would unveil new oil contracts in the coming weeks, earlier than previously expected.

Hatfield said he expects oil investments will shrink regardless of whether the Fed raises or maintains interest rates. “This is one of the most demanding technology projects aimed at improving oil recovery”.

Other countries have emergency oil-supply buffers, and while the U.S. Strategic Petroleum Reserve has been stable at about 700 million barrels for years, China is expanding its stockpiles rapidly. Non-OPEC oil supply in 2016 is expected to grow by 160,000 bpd, a downward revision of 110,000 barrels. A rate hike is still likely before the end of the year, but probably no more than 0.25 percent. By contrast, the long-only United States Oil Fund attracted $2.75-billion in new cash, the most of any commodity-linked ETF.

Across a Mideast fueled by oil production, low global prices have some countries running on empty and scrambling to cover shortfalls, even as more regional crude is on tap to enter the market. On Friday, crude oil fell 4.6%, copper fell nearly 3% and lumber, another economic bellwether commodity, traded down to the lowest level since December 2011.

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We are concerned that lifting the crude oil export ban could harm USA consumers, businesses and our national security, and we urge President Barack Obama to pay close attention to these adverse impacts that could result from any efforts to repeal or weaken this longstanding USA law.

A bad day for Asia's economies?