Oil prices plunge to new lows as glut deepens
The US has now joined the oil exporters and production shows no sign of reducing.
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Hawke's Bay
Oil prices have plunged to levels not seen since 2004 and could be headed lower.
World benchmark Brent oil has traded in London as low as $US36 a barrel for February delivery, the lowest since July 2004.
US oil has dropped below $US34 a barrel for the first time since 2009.
In Tuesday's trading, prices stabilised ahead of the Christmas break but demand remains weak.
Both the US and Saudi Arabia show signs of continued strong production despite a global glut and a year of falling prices.
Prices are now off 68% from the highs of 2014 after about 18 months of steady declines.
US and Canadian producers have made rapid advancements in their ability to find oil through unconventional means in shale rock but Saudi Arabia and other global exporters have refused to cut their output.
US producers actually put 17 more rigs back to work last week despite the lowest prices since the financial crisis. And Saudi Arabia boosted crude exports in October to their highest level in four months.
Baker Hughes’ latest oil rig count was the second largest weekly increase in more than a year.
The move reversed a long slowdown from US producers and suggests oil production may stay stronger than expected despite low prices.
US ends export ban
In a further development, President Barack Obama on Friday signed a spending law that removed the 40-year ban on US oil exports.
This means Saudi exporters soon may have to compete with US producers.
Separately, new data show Saudi exports increased 3.6% from September to October to nearly 7.4 million barrels a day. Exports are up 6.8% from October a year ago despite prices falling 42% during those 12 months.
The global oversupply issue has now become so acute that analysts at Barclays say it's possible the daily surplus could “overwhelm” available storage capacity.
”While the oil market is expected to remain in surplus through 2016, the rate of stock builds is expected to slow and there is enough onshore storage to contain it, in our view,” it says.
Nevil Gibson
Wed, 23 Dec 2015
Wed, 23 Dec 2015
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Oil prices plunge to new lows as glut deepens
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