After a 6% fall in the price of Brent Crude yesterday to just under $53 a barrel, it is down yet another 3% to $51.50 a barrel. The declines seem unstoppable as a combination of excess supply, weak demand, a strong dollar and speculative trading pressure take the commodity lower. Prices are now down to where they were in the depths of the financial crisis five and a half years ago. WTI US light crude oil is now trading at $48.60, down 2.7% on the day, bad news for shale oil drillers in the United States. The fall below $50 in WTI oil is the first time it has happened since May 2009.
Yesterday’s falls were triggered by news that Russian and Iraqi exports are at a peak when demand remains subdued and a report by Citigroup that it forecast the average price of a barrel of Brent in 2015 to be $62 compared with earlier estimates of $80 a barrel.
Saudi Arabia’s Aramco said on Monday that it would cut February export prices for all grades of oil to Europe. At the same time, it increased prices for Asian customers after cutting prices aggressively at the end of 2014. Price cuts by Saudi Arabia have been interpreted by some market participants as a sign that the kingdom will no longer take action to boost prices in a fight over market share. Others have said the price differentials are more a reflection of general market weakness.
With oil prices so weak it was no surprise to see the oil majors hit yesterday, with Shell and BP dropping between 4 and 5% during the day. For the smaller players in the oil exploration sector, things are looking pretty bleak right now with the majors cutting back on spending and hopes resting on merger and acquisitions activity to improve matters. Things will improve in the long haul but share prices reflect short term anxiety as to how low oil prices could drop. Some are betting on a price sub-$35 a barrel this year, whilst others believe the current price reflects an oversold position. It certainly feels like trying to catch a falling knife at the moment with the sellers in control.
Contrarian Investor UK
IMPORTANT: The posts I make are in no way meant as investment suggestions or recommendations to any visitors to the site. They are simply my views, personal reflections and analysis on the markets. Anyone who wishes to spread bet or buy stocks should rely on their own due diligence and common sense before placing any spread trade.
by contrarianuk
Oil keeps on tumbling down
Jan 6, 2015 at 9:50 am in Market Commentary by contrarianuk
After a 6% fall in the price of Brent Crude yesterday to just under $53 a barrel, it is down yet another 3% to $51.50 a barrel. The declines seem unstoppable as a combination of excess supply, weak demand, a strong dollar and speculative trading pressure take the commodity lower. Prices are now down to where they were in the depths of the financial crisis five and a half years ago. WTI US light crude oil is now trading at $48.60, down 2.7% on the day, bad news for shale oil drillers in the United States. The fall below $50 in WTI oil is the first time it has happened since May 2009.
Yesterday’s falls were triggered by news that Russian and Iraqi exports are at a peak when demand remains subdued and a report by Citigroup that it forecast the average price of a barrel of Brent in 2015 to be $62 compared with earlier estimates of $80 a barrel.
Saudi Arabia’s Aramco said on Monday that it would cut February export prices for all grades of oil to Europe. At the same time, it increased prices for Asian customers after cutting prices aggressively at the end of 2014. Price cuts by Saudi Arabia have been interpreted by some market participants as a sign that the kingdom will no longer take action to boost prices in a fight over market share. Others have said the price differentials are more a reflection of general market weakness.
With oil prices so weak it was no surprise to see the oil majors hit yesterday, with Shell and BP dropping between 4 and 5% during the day. For the smaller players in the oil exploration sector, things are looking pretty bleak right now with the majors cutting back on spending and hopes resting on merger and acquisitions activity to improve matters. Things will improve in the long haul but share prices reflect short term anxiety as to how low oil prices could drop. Some are betting on a price sub-$35 a barrel this year, whilst others believe the current price reflects an oversold position. It certainly feels like trying to catch a falling knife at the moment with the sellers in control.
Contrarian Investor UK
IMPORTANT: The posts I make are in no way meant as investment suggestions or recommendations to any visitors to the site. They are simply my views, personal reflections and analysis on the markets. Anyone who wishes to spread bet or buy stocks should rely on their own due diligence and common sense before placing any spread trade.