New York – Crude oil futures tumbled to their lowest in nearly seven years on Monday after OPEC failed to address a growing supply glut, while a stronger dollar made it more expensive to hold crude positions.
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Brent and U.S. crude futures fell as much 5 percent in belated reaction to the Organization of the Petroleum Exporting Countries’ (OPEC) policy meeting on Friday which ended without an agreement to lower production.
For the first time in decades, OPEC oil ministers dropped any reference to the group’s output ceiling, highlighting disagreement among members about how to accommodate Iranian barrels once Western sanctions are lifted.
“We’re in a tug-of-war between a heavily shorted market and a glut of oil in the U.S. and globally, as Saudi Arabia continues to produce oil at elevated levels to maintain market share,” said Chris Jarvis at Caprock Risk Management, an energy markets consultancy in Frederick, Maryland.
“Couple this with a strengthening dollar as the market anticipates a U.S. rate hike this month, oil is heading lower with a near term target of $32 for WTI.”
U.S. crude’s West Texas Intermediate futures were down $1.80 at $38.17 a barrel by 10:33 a.m. EST (1532 GMT). Its session low of $37.96 was barely above 6-1/2 year lows of $37.75 struck in August.
WTI forward contracts <0#CL:> out to 2024 dropped to below $60.
Brent futures
U.S. diesel futures
The dollar was up against a basket of currencies after jobs data published on Friday bolstered the case for a U.S. rate in December.
OPEC’s output of more than 30 million barrels per day has compounded an oil glut, pushing production 0.5 million to 2 million bpd beyond demand.
OPEC kingpin Saudi Arabia, the world’s biggest oil exporter, thinks unconventional oil producers, including U.S. shale drillers who have fed the glut, will eventually be squeezed out of the market by high production costs and low selling prices.
Saudi Aramco Chief Executive Amin Nasser told a conference in Doha he hoped to see oil prices adjust at the beginning of next year as unconventional supplies start to decline.
Patrick Pouyanne, CEO of French oil company Total
AHHHHHHHHH Mechyah
Its the calm before the storm, people don’t realize, these low prices are a precurser for very high prices that will follow, after all the capital spending cuts, all the layoffs in the industry, all the project cancellations, we will be caught by surprise when prices will go up to never imagined hights. That’s without factoring in, the potential destabalization of some countrys that won’t make it in the interm.
I blame Obama for this.
ok, what happens if crude oil hits $200/barrel?