NEGOTIATOR’S TAKE: Transportation, plastic components, and petrochemicals all ripe for downward price negotiations.
12.30.15 – Expanding global surplus due to high-paced production sparks fears that prices will fall further
Below $34 a barrel for the first time since 2009
Brent oil prices fell to lows untouched since July 2004, and U.S. oil dropped below $34 a barrel for the first time since 2009, as both the U.S. and Saudi Arabia showed signs of continued strong production despite a global glut and a year of falling prices.
Prices are now off 68% from the highs of 2014 after about 18 months of steady declines. U.S. and Canadian producers have made rapid advancements in their ability to find unconventional oil, but Saudi Arabia and other global exporters have refused to cut their output, leading to a historic flood of oil as producers around the world fight to keep customers.
Massive oversupply and a U.S. strong dollar
The outlook remains bleak for oil producers as massive oversupply and a strong dollar continue to batter the market. U.S. producers actually put 17 more rigs back to work last week despite the lowest prices since the financial crisis. And Saudi Arabia boosted crude exports in October to their highest level in four months, according to data released over the weekend. The moves show just how far the world’s major producers are from slowing down output.
Source: WALL STREET JOURNAL, December 2015
Article Authors: Timothy Puko and Kevin Baxter