Despite the fall in the rig count, crude oil futures fell by more than 3%.
The OPEC does still feel that they should protect their market share from the United States.
U.S. crude’s front-month was up $1.27, or 2.8% at $45.95 a barrel by 3.15pm GMT. It could be to hurt their two main enemies, Russian Federation and Iran, both of which need higher oil prices to support their economies. After all, if oil prices are going to rise in the next few years you would expect traders to be betting that way… right? The majority of the declines would come from U.S. light crude, which is expected to fall by 400,000 bpd. The issue was further compounded by the fact that demand slowed down in the past year.
Current laws and regulations allow for unlimited exports of petroleum products, but require licensing of crude oil exports. The one exception is if you work in the energy industry-or if you’ve invested in it. Morningstar’s recently revised long-term price outlook for oil is in the $64 to $70 range, and that makes energy stocks an interesting proposition for long-term investors. While this has slowed production growth from US shale formations, it has not yet reduced output enough to balance the market. Companies involved in upstream oil exploration and production activities have become more efficient and are now higher on the learning curve. Exports of crude oil to Canada for use there are presumptively granted licenses, as are exports of crude oil from Alaska’s North Slope (ANS crude), re-exports of foreign-sourced crude, and certain exports from California.
United States output could sink by 400,000 barrels a day next year after a prolonged period of low prices forced producers to idle more than half the rigs seeking oil, the worldwide Energy Agency said in a monthly report. The production from the country will be online by 2016 and that will weigh down prices as well.
While OPEC can continue to sell oil at prices around $40 for a barrel of oil if it chooses, USA companies have shareholders and bondholders to answer to and won’t be able to maintain operations at that price forever. The share price is now down -30.18% for the past three months.
Oil markets reversed some of the previous week’s decline on Monday, as the European session saw both Brent and WTI post upticks, while silver was seen leading the precious metals trade, as gold slipped lower with the boost from last Thursday’s decision by the US Federal Reserve to hold back interest rates having subsided.
It seems like no matter whether oil prices are going up or down, the media cycle is six months behind the curve.