Market analysts Goldman Sachs helped drive oil below US$44 per barrel Monday with a report warning that prices could go “sharply lower” as storage tanks hit capacity.
“The oversupply of oil worldwide has had storage tanks in Cushing, Oklahoma, at record levels for most of the year. It’s not just crude that is in oversupply, but also refined products,” CBC reports. “Goldman Sachs sees further risk to crude prices which are already down 60% from a year ago.”
Following the Goldman report, benchmark West Texas Intermediate crude closed at US$43.81 Monday afternoon. Western Canadian Select, the price for Canadian tar sands/oil sands crude, was down to US$29.23.
“Research consultancy Energy Aspects points to a similar situation in Europe, with crude oil tankers taking slow routes to their destinations while they await space in port storage facilities,” CBC reports. The news item recalls Goldman’s mid-September analysis suggesting that oil could fall as low as US$20 per barrel if fossil fuel companies don’t cut production quickly enough.
While Goldman projected low prices through the end of 2016, the International Energy Agency cautioned oil-consuming countries against taking that for granted. “It will be a great mistake to index our attention to oil security to the oil price trajectory in the short term,” said Executive Director Fatih Birol.
If oil investment declines again in 2016, “this will be the first time in two decades we will see oil investments declining for two consecutive years,” he told an event in Singapore. “One should think about medium- and long-term implications of this lack of investments.”
But last week, Reuters reported that the world’s largest oil traders were “bearish” in their view that crude oil prices could stay below US$60 per barrel into 2017.
“Record-high production from some of the major exporting countries, along with faltering demand in key importing nations such as China and Brazil, has cut the price of oil in half over the last year,” the news agency notes. “The oversupply that has built up in the market is one of largest in at least 30 years, and even refineries around the world running at record rates in 2015 has not been enough to erase it.”
