The weakening Chinese economy, along with the strong U.S. Dollar helped oil prices hit 12 year lows yesterday morning. Morgan Stanley predicts that with a weaker Chinese Yuan, benchmarks could drop into the $20’s by next week.
Oil prices have now collapsed 79% from the 20-year high of $145.29 reached on July 3, 2009. Standard Chartered is predicting oil to fall as low as $10 per barrel, and oil forecasts for 2016 are being cut by analysts at Barclays, Macquarie, Bank of America Merrill Lynch, and Societe Generale as well.
In an alternate perspective from 2004, while bearish forecasters are shocked by the current oil prices, back then there was backlash by U.S. consumers, angry about the record high gas prices of $1.56 a gallon. At the time, oil demand was consistently rising, output levels had been disrupted in Venezuela and Nigeria due to political conflict and instability, and U.S. oil production was falling as well. Additionally, OPEC officials were working to keep crude oil prices above $28 a barrel.
This morning, Nigeria's oil minister made a proposal for an emergency OPEC meeting. The proposal was made at the request of a couple OPEC members, claiming that with the current drop in oil prices a congregation prior to the June 2 scheduled meeting is necessary. However, two representatives from an African OPEC member country claimed no such meeting will be held as production cuts would not coincide with Saudi Arabia’s attempt to flood the crude market.
Trade sources have stated that Iraq, the second-biggest producer within OPEC, plans to export a record of approx. 3.63 million barrels per day from its southern oil terminals in February.
Yesterday, WTI crude closed down $1.75/bbl to $31.41, HO closed down $0.0372/gal to $1.0149, and RBOB finished down $0.0147/gal to $1.1130. Today, HO is trading at a loss of about $0.0275, breaking the psychological $1 barrier. RBOB is down about $0.0150/gal.