Oil Prices Continue To See Downward Slide, Trend Likely To Continue
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Brent crude dropped more than $1 to hit near $78 a barrel after news that the world’s fourth largest crude importer Japan had gone into a recession. It also dropped after on the West’s energy watchdog’s comments that high oil prices were unlikely to return anytime soon.
The possibility of global oil demand picking up was hit with a blow by data that shows an unexpected shrinking of the Japanese economy by 1.6 percent in the third quarter due to weak exports and consumption.
Tokyo’s Mitsubishi Corp. Oil Risk Manager Tony Nunan said this was another bearish factor for crude oil prices.
Brent crude saw a drop of $1.08 to $78.33 a barrel around 7:30 a.m. GMT. The January delivery contract had closed $1.92 higher on Friday. U.S. crude for December delivery settled at $75.04, which was 78 cents lower.
Many people are looking at OPEC’s meeting next week to see what, if any, production cuts are going to be made.
Nunan said the downward trend is still going to happen unless something turns the market around.
The oil minister in Iran accused some OPEC countries for making excuses up to defend their rejection to cut production to stabilize prices. The remark is a possible mention to Saudi Arabia’s official that said the issue needs to be left to the forces of the market.
Is The Oil Market In A New Era
Another sign for bearish oil prices comes after the energy watchdog in the West said the oil market had come into a new era with an increasing output in U.S. shale and lower Chinese economic growth, which could make a rapid return to the high prices unlikely.
Investors are also looking at signs for falling oil prices that affect output from the U.S. tight oil projects. In September, North Dakota’s production saw a rise of more than 50,000 barrels a day to hit 1.18 million bpd. North Dakota is the second-largest oil producing state after Texas.
Bernstein analysts said $80 a barrel is not a sustainable price for the oil industry. According to their analysis of 50 large oil and gas companies, $80 a barrel means the industry doesn’t produce enough cash to be supportable.
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