Wednesday, April 8, 2015
When oil will hit bottom
http://www.cnbc.com/id/102554626
Analysts predicts that the price for crude oil might hit bottom sometime this quarter.
"There's 20 million barrels in floating storage at the moment off the coast of Iran ... which could hit the market pretty quickly," said Dominic Haywood, crude and product analyst at Energy Aspects. Haywood said it will take some time for Iran to make a full release of its oil. Sanctions have cut Iranian exports to about half the 2.5 million barrels it was exporting in 2012.
The big three oil producer -Saudi Arabia, Russia and the U.S - show no significant decrease in production. "This crude phenomena is going to continue for a few weeks. We don't have the refinery utilization over 90 percent. That has to get to 90-91 to stop this incessant building of crude inventories," said John Kilduff of Again Capital. Refineries are currently running at about 89 percent.
The drop in oil prices is burning major producers but OPEC shows no signs of blinking, and analysts say it is the shale producers that are cutting back first. The U.S. Energy Information Administration said on Wednesday that OPEC members, excluding Iran, earned $730 billion in net oil export revenues in 2014, an 11 percent decline from the year earlier. That was the lowest for the OPEC since 2010
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4 comments:
...but will oil prices begin to rise again is the big question for speculation on the economy overall. The crude oil price war between the big three has been an interesting economic and political exercise, with some speculation that the US and their allies are seeking to hurt Russian oil revenues in response to the situation in Eastern Europe.
My theory is that the approaching summer and Saudis entering into conflict, with continuing regional unrest, will start to slow down production and raise prices again. Moreover, the prices will likely begin to naturally increase again despite a glut in supply. This will be offset by new investment starts and seasonal consumption rate changes.
I think it will be very interesting to see what the overall economic impact is when the price for crude oil is at its lowest. Will consumer confidence dramatically raise?
The main reason that OPEC countries are not cutting production is to be competitive against the US production from shale. However, according to the article, there is a buildup of crude oil, so when refineries start running at higher utilization levels, won't the oil prices drop further? Isn't this a signal to reduce production?
If their is this large amount of oil why is their a large amount of fracking occurring? Why are the oil companies destroying the earth and the communities that surround the locations of fracking when currently their seems to be an immense amount of oil in the market.
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