27 October, AtoZForex.com, Lagos – Crude oil prices are now forecast to close the year about a fifth lower than last year, with a likelihood of falling even further next year. The value of the commodity per barrel has dipped by almost 60 percent since June last year, with the West Texas Intermediate (WTI) presently trading around $43 from its around $110 high. Thanks to a supply glut caused by with production from producers in the Middle East, Russia and North America which has been consistently above global demand.
Singapore International Energy Week
In a speech at Singapore International Energy Week, Faith Birol, the executive director of the International Energy Agency, said “low energy prices had made oil companies extremely hesitant to spend money.”
“If it comes true, this will be the first time in two decades we will see oil investments declining for two consecutive years, and may be an indication for future oil markets,” he said.
As also pointed by Goldman Sachs, crude oil prices could be bracing up for a drop sharply further down as refined product storage sites come close to maximum capacity, which increases the glut situation.
“Distillate storage utilization in the U.S. and Europe is nearing historically high levels, following near record refinery utilization, only modest demand growth (especially relative to gasoline), and increased imports from the East on refinery expansion and Chinese exports,” Goldman Sachs said in a note to clients.
Adding that: “This raises the spectre of 1998 (and) 2009 when distillate storage hit capacity, pushing runs and crude oil prices sharply lower,”
Other factors affecting the price of the commodity include: China’s economic slowdown, the prospect of increased Iranian production, the persistence of US shale producers, adamant high production from OPEC members, from Venezuela to Saudi Arabia. All these contributing their share to the Crude oil plunge.
Nasir’s trade journal
Technically, WTI went into a 10 week range, but has now resumed its downward spiral back to its year low around $37.
We expect a further decline for the rest of the year as both fundamental and technical indicators point towards further down side pressure on the commodity.
Think we missed something? Let us know down in the comments section.