Oil tumbles towards crisis-era lows

[kscarbel2]

The Financial Times / December 14, 2015

Oil is close to surpassing the lows hit during the financial crisis amid increased expectations of a persistent oversupply in global crude.

Brent crude dropped $1.60 to $36.33 a barrel — the lowest in seven years. The global benchmark dropped for its seventh consecutive trading session, edging closer to the December 2008 intraday low of $36.20 a barrel.

If Brent falls below this, it will hit a level last seen in the middle of 2004.

“The year is ending on an uncomfortable note. The smell of fear is back in the air,” said David Hufton at London-based broker PVM.

The US market benchmark, West Texas Intermediate, sunk $1.09 to $34.53 a barrel — the lowest since February 2009. WTI traded at $32.40 a barrel in 2008.

Oil prices have tumbled since the meeting of Opec ministers at the start of the month. Brent has plunged 17 per cent while WTI is down 16 per cent.

Discord within the group on which members should make production cuts to shore up the price, led to the continuation of Opec’s existing policy to keep on pumping. In addition, the group scrapped its official production ceiling, taking away any support for the oil price.

“The Opec meeting has removed any last hopes of a reprieve for oil and it has added another layer of downside sentiment to commodities in general. The dam has collapsed and prices are in free fall, with devastating consequences,” said Mr Hufton.

Despite weakening production growth outside of Opec, members of the producers’ group have ramped up output in the face of lower oil prices.

Iraq and Saudi Arabia have pumped at record levels this year, while oil market participants are eyeing additional barrels from Iran when sanctions linked to its nuclear programme are expected to be lifted next year.

The International Energy Agency, the world’s leading energy forecaster, said oil stockpiles are expected to swell throughout next year, albeit at a slower pace than in 2015.

“Gloom is nourishing gloom on the oil market,” said Carsten Fritsch at Commerzbank. The sell-off has taken on “ludicrous dimensions”, he added.

A stronger dollar and money managers re-establishing their short positions were piling on the pressure, said Adam Longson, oil analyst at Morgan Stanley. “The outlook for prices appears grim,” he said.

[kscarbel2]

Oil prices drop towards 11-year lows on worsening glut

Reuters / December 14, 2015

Oil prices fell for a seventh straight session on Monday, coming close to 11-year lows, on growing fears that the global oil glut would worsen in the months to come in a pricing war between leading OPEC and non-OPEC producers.

Brent crude LCOc1 fell by 3.4 percent to below $36.70 a barrel for the first time since December 2008 and U.S. West Texas Intermediate (WTI) CLc1 sank 2.5 percent below $34.70 a barrel.

Brent traded less than 50 cents above the lows last seen during the 2008 financial crisis of $36.20 a barrel. If Brent falls below that level, that will be its lowest since mid-2004, when talk of a commodity super-cycle was only beginning.

WTI's financial crisis low was $32.40 in December 2008.

"Oil is coming under pressure as the lack of OPEC cuts mean incessant oversupply continues," said Amrita Sen from Energy Aspects think tank.

Both benchmarks have fallen every day since the Organization of the Petroleum Exporting Countries on Dec. 4 abandoned its output ceiling. In the past six sessions, they have shed more than 13 percent each.

OPEC has been pumping near record levels since last year in an attempt to drive higher-cost producers such as U.S. shale firms out of the market.

New supply is likely to hit the market early next year as OPEC member Iran ramps up production once sanctions are lifted as expected following the July agreement on its disputed nuclear programme.

"All new production will be earmarked for exports," BMI Research said in a note. "In addition to volumes released from storage, Iran will be able to increase crude oil and condensates exports by a maximum of 700,000 b/d by end-2016," it said.

Iran's crude oil exports are set to hit a six-month high in December as buyers ramp up purchases in expectation that sanctions against the country will be lifted early next year, according to an industry source with knowledge of tanker loading schedules.

Iranian news agency Shana quoted on Monday manager director of Iran's Central Oil Fields Company, Salbali Karimi, as saying Iran's cost of production stood $1-$1.5 per barrel, in a clear indication it would ramp up output in any price scenario.

Gulf producers and Russia have previously said they would not cut output even if prices fell to $20 per barrel.

On Friday, the International Energy Agency (IEA) that the global supply glut was likely to deepen next year and put more pressure on prices. But it said it didn't believe the world would run out of storage capacity [EIA/]

OPEC supply is likely to increase by 1 million bpd next year, Morgan Stanley analysts said in a research note Monday.

"Almost the entirety of added supplies in 2016 will come from Iran, Iraq and Saudi," it said.

[Outbehindthebarn]

So much for fracking in the Marcellus region!

[Mcrafty1]

For years oil was $30.00 bucks a barrel...Fuel was $1.00 a gallon, truck tires were $250.00 each and a tube of multi-purpose grease was.$.99. Then oil jumped to $140.00 a barrel and fuel went to $4.00 bucks a gallon, truck tires went to $500.00 each and a tube of multi-purpose grease went t $3.00 bucks a tube. Today oil is $37.00 a barrel, fuel is $2.59 a gallon, a Truck tire is $500.00 each and a tube of multi- purpose grease is $3.00......somebody is STILL making a piss pot full of money, and it ain't the consumer.

I guess if you've been putting your disposable income into oil stock the past few years the low barrel prices are making you uneasy....if you're on the other end of the spectrum....not so much.

[Outbehindthebarn]

For years oil was $30.00 bucks a barrel...Fuel was $1.00 a gallon, truck tires were $250.00 each and a tube of multi-purpose grease was.$.99. Then oil jumped to $140.00 a barrel and fuel went to $4.00 bucks a gallon, truck tires went to $500.00 each and a tube of multi-purpose grease went t $3.00 bucks a tube. Today oil is $37.00 a barrel, fuel is $2.59 a gallon, a Truck tire is $500.00 each and a tube of multi- purpose grease is $3.00......somebody is STILL making a piss pot full of money, and it ain't the consumer.

I guess if you've been putting your disposable income into oil stock the past few years the low barrel prices are making you uneasy....if you're on the other end of the spectrum....not so much.

Dairy farming is exactly the same.

[Freightrain]

I heard from someone a story about an oil company(don't know who/what/where) that gave EACH employee $100K(100,000) christmas bonus. Not BP or such, I'm guess a small firm? Don't know how much BS it is, but I'm guessing someone is still making a boat load of money on oil.

[j hancock]

The government will certainly be looking for its share of the bonus money from those employees.

[kscarbel2]

This week is big, with oil prices crashing, China decoupling the Yuan from the dollar and the Fed's Yellen expected to announce a rate increase tomorrow which could destabilize much of the world (due to their current circumstances).

[kscarbel2]

Fuel prices continue to fall nationwide

Overdrive / December 14, 2015

Another significant drop in national fuel prices has the U.S.’ average price of diesel down to $2.338 per gallon, according to the Department of Energy’s weekly report.

Last week’s price was 4.1 cents lower than a week ago, and it was $1.081 lower than the same week in 2014.

Prices dropped in all regions across the country with the most significant decrease coming in New England, where prices dropped 6.2 cents, followed by California and the Midwest, where prices dropped 5.4 cents.

The most expensive diesel is in California at $2.65 per gallon, followed by the Central Atlantic region at $2.501 per gallon.

The nation’s cheapest diesel can be found in the Gulf Coast region at $2.212 per gallon, followed by the Lower Atlantic region at $2.258 per gallon.

Diesel prices in other regions are as follows:
•New England – $2.453
•Midwest – $2.294
•Rocky Mountain – $2.375
•West Coast less California – $2.431

[1958 F.W.D.]

Can someone please explain why low oil prices is a bad thing? Please explain it in layman's terms to someone who never had a day of Kollege in his life......All I know is that right now it's costing me less and less to feed my pickup and the wife's van, which is good because we both drive a lot for our jobs....So I don't unnerstan why all this so bad.....???

[BOB DINGSDALE]

anybody know the price of diesel i u s off hand .it's 95.9 a litre up here which is the same size as your quart.about $4.29 per imperial gallon

[hatcity]

I get diesel for $2.24.9/gal.

local gas is about $2.05

I hear lots of Canadians are not coming to Florida this year due to the low Canadian dollar...like .75 US

[kscarbel2]

Can someone please explain why low oil prices is a bad thing? Please explain it in layman's terms to someone who never had a day of Kollege in his life......All I know is that right now it's costing me less and less to feed my pickup and the wife's van, which is good because we both drive a lot for our jobs....So I don't unnerstan why all this so bad.....???

For one thing, it destabilizes the markets. You've noticed the stock market falling in parallel with oil prices.

[RedBullDog]

Can someone please explain why low oil prices is a bad thing? Please explain it in layman's terms to someone who never had a day of Kollege in his life......All I know is that right now it's costing me less and less to feed my pickup and the wife's van, which is good because we both drive a lot for our jobs....So I don't unnerstan why all this so bad.....???

In states like Texas and here in Oklahoma a large portion of the entire economy is based on the energy sector, whether its upstream with office jobs in marketing and accounting, "real property", etc.. to pipelines, tank farms(Cushing), refineries, back to the well head with drillers, pumpers, completion companies, and location building. I would guess one in four people in this area works directly for or along side a company in this sector. Lots of layoffs, deep pay cuts, and benefit losses have happened here and will continue to until the market returns. These jobs are, in many cases, the only jobs worth a damn in the area. We are hurting from both lack of new investments in production, and loss of income for those around us. Farm prices are also in the toilet adding to the misery.

[RedBullDog]

anybody know the price of diesel i u s off hand .it's 95.9 a litre up here which is the same size as your quart.about $4.29 per imperial gallon

Anywhere from $1.89 to $2.10 a gallon around northern OK.

[Brocky]

Here in South Carolina with low taxes along the interstate fuel runs $2.05 to $2.10.. 2 weeks ago I fueled up for $1.95 at one place.

[carlotpilot]

we bought diesel in texas and nm in the 60s for 16.5 cents a gallon the economy did`nt collapse then but surged why the hell should it collapse now at 2.00 a gallon

[Outbehindthebarn]

Can someone please explain why low oil prices is a bad thing? Please explain it in layman's terms to someone who never had a day of Kollege in his life......All I know is that right now it's costing me less and less to feed my pickup and the wife's van, which is good because we both drive a lot for our jobs....So I don't unnerstan why all this so bad.....???

One answer I can give: The demand for oil is coupled to growth in manufacturing. A low demand puts down pressure on price, which is good for folks at the pump, and heating your house, but it indicates a sluggish economy.

[kscarbel2]

we bought diesel in texas and nm in the 60s for 16.5 cents a gallon the economy did`nt collapse then but surged why the hell should it collapse now at 2.00 a gallon

Because the metrics of the world today are entirely different.

[1958 F.W.D.]

I still don't get it- especially the relation to farming. Fuel is cheaper, which means cheaper to run tractors....Cheaper to get product to market, cheaper to get feed to the farm, etc etc etc.......Which should lower food prices.....?? People are using more fuel, why all the loss of jobs?

[Underdog]

So much for fracking in the Marcellus region!

Another reason OPEC won't slow down, they will starve out any competition.

Sent from my XT1254 using Tapatalk

[Underdog]

For years oil was $30.00 bucks a barrel...Fuel was $1.00 a gallon, truck tires were $250.00 each and a tube of multi-purpose grease was.$.99. Then oil jumped to $140.00 a barrel and fuel went to $4.00 bucks a gallon, truck tires went to $500.00 each and a tube of multi-purpose grease went t $3.00 bucks a tube. Today oil is $37.00 a barrel, fuel is $2.59 a gallon, a Truck tire is $500.00 each and a tube of multi- purpose grease is $3.00......somebody is STILL making a piss pot full of money, and it ain't the consumer.

I guess if you've been putting your disposable income into oil stock the past few years the low barrel prices are making you uneasy....if you're on the other end of the spectrum....not so much.

And the electric power companies... for years they have raised the rates on electricity, claiming the cost of production has gone up... but do you ever see electric rates go down when the cost of production goes down?

Sent from my XT1254 using Tapatalk

[Michael Droster]

Shoot let it fall, the lower it goes the better my bonuses get I work in a plastics factory they reduce material costs when oil drops and that in. turn increases profits which adds money to our 104K's profit sharing and bi annual bonuses

Not to mention my 9mpg Jeep Wagoneer costs me less to get to work

[Mcrafty1]

For one thing, it destabilizes the markets. You've noticed the stock market falling in parallel with oil prices.

If you don't put your money in the market, which I don't... why then is lower oil prices a bad thing? High oil prices destabilized MY market, the one I run my Business and household out of. I have noticed a BIG increase in my earth work business since oil prices dropped to reasonable levels and stayed there for longer than a few weeks, If the markets weren't allowed to dictate what our politicians do on a daily basis the rest of us would be far better off economy wise.

I for one, feel that the day the politicians stopped making the speculators having to take possession of the oil they bought to resell and hold it for thirty days before doing so was the day the oil companies/ speculators started dictating what our economy does at any given time. Make them turn back the clock and hold the oil they buy for that thirty day period and the swings in oil prices will drop drastically.

[Outbehindthebarn]

I still don't get it- especially the relation to farming. Fuel is cheaper, which means cheaper to run tractors....Cheaper to get product to market, cheaper to get feed to the farm, etc etc etc.......Which should lower food prices.....?? People are using more fuel, why all the loss of jobs?

All true on my end, although the trucking I pay for hasn't reduced their rates, and I don't expect them to be raised when fuel eventually rebounds. Fertilizer is petroleum based and those prices are down too, which is good.

But,.....

Commodities are down, way down from 2014 levels. The volatility in commodities is not precisely linked to the crude, but more closely related to demand which has fallen off. (Russian embargo, the decline in Chinese imports, etc.) not to mention that farmers are their own worst enemy and produce way too much when times were good, creating a surplus (also creating a lot of young farmers eager to become indebted in order to produce more, not recognizing that by the time first payment came due on their new combine, the 'fat times' had already passed).

Labor is still expensive (no surprise there) and so is electricity. These two components make up the largest portion of my operation's expense, so while crude being down helps, I'd happily pay more if it meant that commodities were back to 2013-14 levels

Farming is its own 'thing'. Introductory college economics courses usually devote an entire chapter to what is referred to as "The Farm Problem" therefore my explanation should be considered a perfunctory one.

Food seems to be tied to inflation, more so than to the profitability of those producing it. If I had a nickel for overtime some farmer said "Boy milk is down, but its not down in the store!!!" . . .reflecting the crooked nature of middle-men who wouldn't recognize the South-end of a North-bound cow.