Crude oil attempted to rally during the week as it traded to highs of $48.07 on Thursday.
It’s unfathomable how Malaysia – a net exporter of oil and gas (O&G) – would be impacted should the price of crude drop to US$20 per barrel.
Hedge funds slashed their bets on falling oil prices, leaving them the most bullish in two months as OPEC called for a return to $80 crude. “But we will see a recovery, probably $50 to $70 a barrel in 2016″. That demonstrates how producers are making more efforts to cut back supply following the downturn in prices.
“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.
Goldman Sachs is well-known for its prediction in the first half of 2008 that oil would possibly reach US$200 per barrel. United States oil data this week suggested the world’s biggest oil market may be beginning to tighten. The drop occurred amid numerous fundamental and non-fundamental factors, with enduring oversupply and the slowdown in the Chinese economy having the largest effect. Additionally, USA imports of Saudi medium and medium light crude oil rose 275,000 bpd over the second quarter of 2015, even though U.S. importation from OPEC as a whole was down on lower takings of Iraqi oil (see below). 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.
So you have one camp that says: “When the Fed raises rates, it will be doom and gloom for Asia’s economies”.
“In the long run, there’s far more risk to being a leveraged short”, said George Zivic, a New York-based portfolio manager at OppenheimerFunds Inc., which oversees $220-billion.
World oil prices have roughly halved in value since a year ago, plagued by a global supply glut caused largely by cheaper production of USA oil following extraction from shale rock. Who blinks, or is forced to blink, would be the crude question for the remainder of this year, according to Christof Ruhl, head of research at Abu Dhabi Investment Authority (ADIA), the oil rich Emirate’s sovereign wealth fund. However, distillate inventory grew by 2.84 million barrels as opposed to an estimated withdrawal of 360,000 barrels. Their worries were not assuaged in spite of a significant draw last week when USA crude stockpiles fell by 2.1 million to 455.9 million barrels.
On the supply side, a Fed rate hike could curb US production.
The pullback on spending is already straining USA oil production.
Oil bulls, however, chose to overlook the build in fuel stocks and focused on the big draw numbers for crude.