Tag Archives: Oil Prices

Oil Prices Hit 6 1/2 Year Lows

Oil prices opened today by falling 6 percent to a 6 1/2 year low as markets worried about a Chinese-led global economic slowdown.

The markets were already steadily falling due to a season of plentiful oil supply.  However, one oil market analyst said the common forces of supply and demand are not causing the problems within the oil market prices.

“Today’s falls are not about oil market fundamentals. It’s all about China,” Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt, told the Reuters Global Oil Forum. “The fear is of a hard landing and that things get out of the control of the Chinese authorities.”

West Texas Intermediate crude oil fell below $39 a barrel early Monday, a level that had not been reached since 2009.  The market had closed on Friday at $40.29.  In June 2014, oil was hovering around $100 a barrel.

The prices could fall significantly further if the Iranian nuclear deal between the Obama Administration and Iran is approved. The lifting of restrictions because of the deal would have Iranian oil flooding into the world market supply.  Iranian officials said they would be aiming to raise production.

“We will be raising our oil production at any cost and we have no other alternative,” Iranian Oil Minister Bijan Zanganeh said. “If Iran’s oil production hike is not done promptly, we will be losing our market share permanently.”

The company that tracks gasoline prices for AAA reports that gas prices at the pump for Americans will likely fall below $2 after averaging around $3.40 a year ago.

Chinese Stock Market Plunge Roils Markets

The Chinese government is preparing to buy shares of stock to stabilize their markets after a plunge of more than 8 percent on Monday that impacted markets across the world.

The government also threatened to “deal severely” with anyone who is found to be engaging in “malicious shorting of stocks” in the government’s opinion.

The two Chinese markets, the CSI300 and the SSEC lost 8.6% and 8.5% respectively.  Only 13 of the 1,114 stocks on the Shanghai Composite were up after Monday.

“Because of the high, still high leverage exposure of the Chinese markets, anything that triggers a decline in such a short time will see some negative spiral effects in such highly leveraged markets,” Raymond Yeung, senior economist of Greater China at the Australia and New Zealand Banking Group, told VOA.

The Chinese market collapse caused the Dow Industrial Average to fall 150 points at the opening Monday.

“The fear factor of China is very much alive in the market. That’s nearing us to some technical support levels,” said Peter Cardillo, chief market economist at Rockwell Global Capital told CNBC. “Slow growth out of China just complicates the oil picture.”

The Chinese market caused oil to fall below $48 a barrel.

One Chinese market expert says the government should allow the market to correct as Chinese stocks are overpriced.

“The valuation of Chinese [stock] markets remains over-priced, which creates rooms for further downward revisions. The government’s rescue measures could curb the slides in a short term, but are powerless in reversing the long-term trend,” Lu Suiqi, associate professor of economics at Peking University says.

OPEC Leader Vows To Not Cut Output

The de facto leader of OPEC has told the press production of oil will not be reduced even if the prices fall to $20 a barrel.

Ali al-Naimi, Saudi Arabia’s Oil Minister, is basically telling the world that the group is now focused on maintaining their market share in light of the U.S. shale oil boom.

“It is not in the interest of OPEC producers to cut their production, whatever the price is,” al-Naimi told the Middle East Economic Survey. “Whether it goes down to $20, $40, $50, $60, it is irrelevant.”

The most shocking comment from the man who is considered one of the most influential figures on the oil market was that the world may never see $100 a barrel oil again.

“We have entered a scary time for the oil market and for the next several years we are going to be dealing with a lot of volatility,” Jamie Webster, oil analyst with IHS Energy told the Financial Times. “Just about everything will be touched by this.”

Oil prices have tumbled almost 50 percent since June because of both a huge supply gain from U.S. shale output along with decreased demand in Europe and Asia.  The market dove more than a dollar after the comments from al-Naimi.

OPEC had been well known for cutting production when oil prices fall in an attempt to keep up profit margins.  When the U.S. was in the midst of recession in 2008, OPEC cut production to raise prices to make it harder on the U.S. during the economic downturn.

Oil Prices Tumbling; Global Economy Slowing

World oil prices are continuing a downhill slide amid fears the world economy is slowing and could go back into recession.

Brent crude oil fell to near four-year lows and the US standard, West Texas Intermediate, lost more than a dollar.  Brent has lost almost 28 percent of its value since June.

The slide comes as economic news makes it appear the world is facing another slowdown or possible recession.  China’s consumer inflation fell to a five-year low this week and prices for U.S. producers fell for the first time in a year.

Also, US crude oil inventories rose at a level almost four times higher than previously estimated by analysts.

The news led to downward rallies on Wall Street with the Dow losing hundreds.

World leaders from oil producing countries are calling for emergency meetings to try and stop the slide in oil prices.    The International Energy Agency is cutting predictions for oil growth in 2015 as a result of the recent conditions.