Analysts see recovery as oil price crisis persists

Analysts see recovery as oil price crisis persists
Updated 12 December 2014

Analysts see recovery as oil price crisis persists

Analysts see recovery as oil price crisis persists

The International Energy Agency said on Friday oil prices will likely come under further downward pressure as Brent crude slipped toward $62 a barrel, its lowest since July 2009, on persistent concerns over a global supply glut and weak demand outlook.
Brent was down $1.01 at $62.67 per barrel by 1354 GMT, having hit an intraday low of $62.50. Brent is down more than 9 percent this week, some 45 percent below its June peak above $115 per barrel.
US crude was down $1.25 cents at $58.70 a barrel, after falling to a low of $58.56, also the weakest since July 2009. The contract has lost about 11 percent this week, Reuters said.
John Sfakianakis of Ashmore Group told Arab News: “Oil prices have proven to be resilient on the downside and it seems that the bottom hasn’t been discovered yet. There are still downside risks but the worst in terms of prices are behind us.”
He said oil prices have been exagerrated on the downside due to supply and global growth concerns.
However, he said: “Oil prices will begin to recover in the first half of 2015 and more so in the second half as signs of emerging market recovery persist. Double-digit oil price is a foregone conclusion for the short term.”
Sfakianakis said: “The impact for Saudi Arabia is obvious given that oil has dropped by $40 since the late summer. Revenues will be impacted this year as the fiscal surplus will shrink.”
He said: “For 2015, a lower breakeven price will be adopted as spending is restructured and reconfigured. The economy however is still healthy.”
The IEA cut its outlook for global oil demand growth for 2015 by 230,000 barrels per day (bpd) to 900,000 bpd on expectations of lower fuel consumption in Russia and other oil-exporting countries.
The Organization of the Petroleum Exporting Countries (OPEC), which accounts for a third of world oil output, sees 2015 demand at the lowest in more than a decade, Reuters said.
Top energy consumer China released data on Friday showing near-record refinery runs in November, with factory output growth weaker than expected.
High Chinese oil demand, which has remained above 10 million bpd for the past three months, could help provide a price floor.
Analysts said there was scope for oil to slip further.
“We are getting quite close to excess supplies which could push prompt Brent (prices) down to incentivize traders to store increased volumes of crude on ships, as onshore storage fills up,” Abhishek Deshpande, an analyst at Nataxis told the Reuters Global Oil Forum.
He added oil could briefly fall as low as $40 per barrel.
The plunge in oil prices battered currencies strongly linked to crude exports, with Norway’s crown falling to an 11-year low against the US dollar and the Russian ruble hitting another record low. The Canadian dollar slumped to a 5-1/2-year trough against the greenback.
Commenting on the falling oil prices, a regional analyst said “I don’t think we should read too much into this dynamic. The prices are looking for a level where a dispassionate assessment of the demand-supply conditions can be made. The downward dynamic reflects uncertainty but also momentum trading as many people take short bets.”
However, he said: “It is clear that a supply squeeze has already started while lower prices will fuel demand. The question is how quickly will the situation begin to reverse itself.”