Stock selloff has reached panic levels as oil falls below the psychologically critical level of $30/barrel. WTI futures fell below $30 for contracts expiring in February briefly on Wednesday, before ending the day slightly above at $30.58. The decline was prompted by news that Iran will add 500,000 barrels a day of exports within a week of the removal of sanctions against the country.
Oil fell to its lowest price since 2003 as a supply glut, weakening demand, and a global slowdown in growth makes the fossil fuel less in demand. WTI oil futures fell to near $30 per barrel in a volatile session in which the commodity ranged from $30.41 to $32.22, while rumors have begun that OPEC is planning an emergency meeting on how to manage the supply and price of oil in the face of a constant downward spiral.
Oil prices jumped on the first trading day of 2016 as Middle East tension outweighed a selloff in financial markets around the world.
OPEC says that $10 trillion worth of investment will need to flow into oil and gas through 2040 in order to meet the world’s energy needs. The OPEC published its World Oil Outlook 2015 (WOO) in late December, which struck a much more pessimistic note on the state of oil markets than in the past.
The International Monetary Fund (IMF) has turned a critical eye to Iran’s return to the international markets following years of economic sanctions that had cut it off from much of the rest of the world. In particular, resurgence in Iranian oil exports in 2016 could have dire consequences for crude oil prices, which have already sunk in price over the last year. According to the IMF, the surge of Iranian oil supply on the market could push down prices by as much as $5 to $15 a barrel.
Oil prices plummeted to their lowest point in 11 years, prompting fears that energy companies will prove unable to pay back loans, which could cause rippling financial weakness throughout the global economy. Brent crude oil prices fell to $36.52 during Monday trading in European markets, while global supplies, especially in the United States, remain at record high levels.
It has been a turbulent year for oil. Prices were strong in summer 2014, before plummeting in the second half of that year. After a modest stabilisation in early 2015, they dropped even further and are now more than two thirds lower than in summer 2014 – as the graph below shows. It’s bad news for oil producers but is forcing some, at least, to reform their economies as a result.
Every year around the world, hundreds of millions of children wait anxiously for Santa Claus to arrive and bring presents and good cheer. But what if Santa never came? What if this year the reindeer all fall ill, perhaps due to Crazy Reindeer disease (the analog to Mad Cow) and Santa is forced to cancel Christmas? The result would be devastating.
Business is business, so why not buy oil from ISIS. The Russians claim the Turks are doing it, and in all likelihood, even Assad is buying it. No one can fight a war without oil, according to Robert Bensh, partner and managing director of Pelicourt LLC oil and gas company. However, while the politically unhinged are coming out the woodwork, the more important aspects of this story remain elusive to the public.
With OPEC breaking down and any kind of coordination among its members on price cuts looking increasingly unlikely, it now appears that oil prices could remain below $50 a barrel for a year or more. As producers confront this unpleasant reality, some will finally start to significantly curtail or even shut down operations. That is going to severely hurt an all but invisible group; strippers in the United States.
