Published: Sat, February 10, 2018

Oil prices fall continues after Iran announced plans to boost production

Oil prices fall continues after Iran announced plans to boost production

"Supply looks quite healthy and that's taking the edge off oil prices", said Nitesh Shah, a commodities analyst at ETF Securities in London. One of the main industrial indexes, the Dow Jones Industrial Average fell more than 600 points, only the ninth time in history that a fall of that magnitude has occurred.

According to an online poll conducted by Business Standard, more than 55% people are of the opinion that crude oil prices will float between $60 to $70 per barrel in 2018.

OPEC and non-OPEC producers reached an agreement in December 2016 to curtail oil output jointly and ease a global glut after more than two years of low prices. "Seasonal slowdown in refinery activity across the world, USA production growth beating expectations and the well known risk of funds hitting the sell button are the current drivers".

At the time of writing, Brent crude oil prices were down 1.22 per cent at $64.71 a barrel while West Texas Intermediate, the USA benchmark, was down 1.59 per cent at $60.81 a barrel.

Until the early 2000s the U.S. were oil starved, importing a peak of 12 million bpd.

On Wednesday, oil prices traded down for the fourth consecutive session following reports that the crude and fuel stockpiles in the U.S have risen last week with drillers in the states planning to increase production further.

A cargo of USA condensate has reached Abu Dhabi in the latest sign how much the oil market has changed in the last few years.

The Dow Jones Industrial Average sank another 500 points on Thursday as a renewed rise in USA bond yields and fears of higher inflation unnerve investors still piecing over a historic drop earlier this week. U.S. producers, by contrast, export on the basis of freight costs and price spreads between U.S. and other kinds of crude oil. While shale producers in the United States essentially require oil prices to remain at around the $50-per-barrel region to cover their production costs and the high-yield bonds used for financing, OPEC will do all it can to ensure that oil prices are tightly balanced, thereby discouraging additional entrants into the market, as they have already seen their market share dwindle in the wake of USA crude-oil producers. According to London-based consultancy Energy Aspects, a slump in new production outside the USA shale patch in 2019 could help boost Brent above $100/b next year. That Russia and Saudi Arabia have agreed to freeze oil output gives the USA a chance to catch up in the near future.

The number of oil drilling rigs in the USA climbed for a second week in a row.

The theory of quantum mechanics and Einstein's theory of relativity (E=mc2) have taught us that matter (yin) and energy (yang) are inter-related and interdependent.

"In the short term, due to high volatility, Brent prices may drop to $60, but as for futures with later expiration dates, any drop in the area of $60-65 per barrel is a signal to buy".

But the biggest market driver was US production. Most of the crude-oil contracts traded globally are priced in U.S. dollars.

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