Oil Dips Below $30 With No End to Slump in Sight
14.01.2016

Oil Dips Below $30 With No End to Slump in Sight

Oil Dips Below $30 With No End to Slump in Sight

The oil price trend has been volatile for several trading sessions, with strong intra-day rallies typically giving way to late sell-offs that are contributing to a steady, cumulative decline.

Yesterday, after hitting a high close to $33 a barrel, the international benchmark Brent crude at one point fell below $30 a barrel in New York. It has since recovered slightly but at just 20 cents above $30, the price remains around the 12-year low reached last week and almost all predictions are for further steep falls to come.

Unsurprisingly, it was new data that evidenced the stubborn global oil-supply glut that precipitated the latest slide. The international energy watchdog reported that output around the world grew by 200,000 last week, the Daily Telegraph notes, even as the market is already producing one to two million more barrels a day more than is being consumed.

The International Energy Agency also revealed Russian exports reached a post-Soviet era high last year. The country is one of several major producers around the world - including the de facto leader of the powerful Opec cartel Saudi Arabia - locked in an internecine battle for market share.

Elsewhere, the US energy watchdog said the country's reserves of oil derivative products surged last week. An 8.6 million barrel rise in stockpiles of petrol in particular added to a 10.6 million barrel lift the week before, constituting what CNBC describes as "an unheard of two-week build".

As important, the Energy Information Administration reported a second consecutive week of modest growth in shale oil output, taking overall US supply up to 9.23 million barrels a day. The production turf war was supposed to have clipped the wings of the sector and thus eventually prompted a rebalancing of the market.

All in all, the picture remains extremely bearish, especially when the political ructions in the Middle East, which will undermine any cohesive response to the glut, are factored in. Analysts have said prices will fall to $25, $20 or even as low as $10 a barrel in the coming months.

This will push petrol prices to ever lower levels in 2016, the RAC claims. If oil reaches $10, it expects the cheapest petrol in the UK to be sold for around 86p a litre, below the level of most supermarket bottled water.

Source: www.theweek.co.uk

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