Lower crude oil prices likely to be norm for some time

April 8, 2015 4:44 AM

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During the course of February, Crude oil prices derived an element of support from the sharp decline in US rig count activity. The rig count (measured by Baker Hughes report) has fallen to 922, down from 1600 rigs in October. Fresh buying emerged around the crucial support levels of US$43-45/bbl (WTI), which paved the recovery till US$53-54/bbl. However, the broader price trajectory remained fragile considering the fact there are no signs of moderation in the output from OPEC nations. OPEC output during February is reported at 30.05mbpd, constantly higher than the production quota of 30mbpd. On non-OPEC side, US oil inventories have surged by more than 66mn barrels during this year, with total stockpiles standing at an 80 year high of 448.9mn barrels. Total non-OPEC output continues to grow, with Energy Intelligence reporting the January production figure at 57.33mbpd, higher the prior month reading of 57.05mbpd. On demand side, IEA raised its demand number by 200,000bpd, while OPEC sees offtake up by 430,000 bpd. The EIA expects modest 140,000bpd expansion in demand for OPEC’s crude, however overall global demand picture is expected to remain murkier.

On supply/demand balance, Energy Intelligence numbers state that global markets during January witnessed a surplus of 3.7mbpd, much higher than the surplus of 1.9mbpd during December 2014. On geopolitical front, negotiations between US and Iran on nuclear deal are progressing, with both the sides st...

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