Why is the price of black gold will collapse to $ 35
The price of oil over the past month fell more than 20 percent. Analysts say that a further decline of quotations will be a clear indication of the dominance of the “bear” sentiment in the market when prices are steadily decreasing. However, in the last year oil prices go steep zigzags — this is not the first of their collapse and may not last.
The recovery period in the oil market came to an end, and the quotes clearly show it. The first of August Texas mark WTI has fallen below $ 40 per barrel. This has not happened since April. The decline from the peaks reached 22 percent. Slightly better looks and North sea Brent, a couple of times fell below the level of $ 42 per barrel.
In late spring and early summer there were no signs of such a collapse — quotes moved above $ 40 and then above 50. Paradoxically, the growth was not impeded even constant negative news. Neither the lack of agreement on the freezing of production or historical highs in terms of production, demonstrated by Russia, Iraq and other countries, did not affect the overall bullish trend (recall that the bulls horns raise the price up, the bears paws push them down). Then he sounded the predictions about the return of the price to 60, 80 or even 100 dollars per barrel.
What happened in these last weeks? Apparently, they agreed several factors that have increased the pressure on the oil market. And there was a Domino effect. The real advantage of supply over demand is traditionally more increased and investors ‘ expectations that it will get worse. In the end, you can select multiple signals to market from different countries that oil is too expensive.
The price of oil over the past month fell by nearly 20 percent
Photo: Mohamed Abd El Ghany / Reuters
Iraq
The Republic is steadily expanding its oil production and no war with the Islamic state (the terrorist organization banned in Russia), ongoing still bitter about it, that is not stopping the majority of developed deposits removed from the conflict zone.
In July, Iraq increased exports to the world market via southern ports (that is, excluding oil pipeline from Kurdistan) for the next 90 thousand barrels per day (total for last year by 500 thousand barrels). It allowed Baghdad to earn 3,74 billion dollars. Iraq promises to continue to export even more. And oil reserves, the country is in fourth place in the world.
Saudi Arabia
In summer, the Saudis once again increased its production close to record levels (about 10.5 million barrels per day). But this is not important. 31 July reported that state oil company Saudi Aramco will provide consumers from Asia discount 10 percent. Just a week ago, the representatives of the Kingdom were told about the readiness to stop an aggressive fight for a place in the market for higher prices. While reality with the words of Riyadh at odds.
The fierce competition in the terms of Iran to the world market reached a climax. The fear of losing market share in the Gulf States clearly outweighs the concerns about that because of the low prices they will not agree a budget. Investors have a strong suspicion that at least in the coming months the situation will not change dramatically, and hence, oil will continue to become cheaper.
Libya
The civil war that intermittently goes in this country for more than five years, impact on production and export directly. Before the overthrow of Colonel Gaddafi, Libya was producing 1.6 million barrels per day. Now to work up 400 thousand.
Two parallel government (Islamist in Tripoli and in Tobruk moderate) the country is not really in control of the ports and fields are often captured by the rebels. And now the supply from three key ports in the East of the country is almost interrupted because of the actions of local militias that are released for export only 100 thousand barrels a day.
Oil production in Libya can increase dramatically if the government will manage to negotiate with the militants
Photo: Ismail Zitouny / AP
But the Libyan national oil company said that the government in Tobruk has agreed with the militants and shipment of oil in the Mediterranean will resume.
Production is planned to increase to 150 thousand barrels in two weeks, and by the end of the year to reach the level of 900 thousand barrels. Perhaps this will not happen — Libya is a very unpredictable country. But the market responded.
USA
There is a curious intrigue associated with the sustainability of the shale companies. In comparison with peak of last year production in the country decreased by almost 20 percent. Indeed, because of the extremely low prices the manufacturers of frozen projects.
However, according to the latest data, the situation is slowly improving. The rig count rose in July in 44 units, and this is the best figure since the spring of 2014. Production rose in July by about 80 thousand barrels a day. It is, however, a little bit. But, perhaps, the American industry reached its bottom.
Much stronger than the market was affected by the data on commercial stocks in the United States that the entire month of increased after a considerable decline in June. In the previous two months actively refineries purchased crude oil, relying on big sales after the start of the summer racing season.
It turned out that the demand from Americans has been exaggerated, and the plants were left with huge surplus of petroleum products. In these circumstances, the demand for oil decreased, which led to a new increase in reserves.
Generally, with commercial reserves in the world now very good — or bad, judging from the position of those who wished to rising prices.
Us refineries were hoping for increased demand for gasoline and bought a lot of oil
Photo: Jason Reed / Reuters
“According to recent data, commercial oil stocks in OECD countries are at a record level of above 3 billion barrels, which is also a negative factor for prices,” said a senior consultant at Vygon Consulting Darya Kozlova.
To 40 and below
Analysts ‘ forecasts about the future of oil prices diverge. For example, in Bank of America believe that by the end of 2016, prices should rise to $ 55 per barrel, and by 2017 will increase to 61 per dollar.
Drop to 35-40 dollars for a longer period can only be caused by a force majeure, reported analysts at the American financial Corporation. This unforeseen circumstance can become a recovery of production in Libya, they said.
“I expect stabilization of the oil market around the current levels of 40-45 dollars per barrel, because the chances for accelerated growth of production in Libya is not so high, — says the analyst of IFC Markets Dmitry Lukashov. — Iraq it took three years to increase production from 3.2 million barrels per day in 2013 to the current 4.3 million barrels.”
If production growth and an increase in the number of active drilling rigs continues, oil could fall to $ 35 per barrel, according to the Raiffeisenbank. At the same time, it is expected that the average cost of Brent in the 4th quarter of 2016 will be $ 49 per barrel in 2017 — $ 55. “We expect a gradual reduction in US production, which should support quotes”, — concluded the Bank analyst Andrei Polishchuk.
