Crude Falls Below $35 per Barrel in New York for First Time Since 2009

[GennGreymane]

http://www.bloomberg.com/news/articl...ime-since-2009

Oil fell below $35 a barrel in New York for the first time since 2009 as Iran reiterated its pledge to boost crude exports, bolstering speculation OPEC members will exacerbate the global oversupply.

Futures fell as much as 2.7 percent to $34.67 a barrel in New York, the lowest since Feb. 19, 2009. They lost almost 11 percent last week, the biggest drop in a year. There’s “absolutely no chance” Iran will delay its plan to increase shipments even as prices decline, said Amir Hossein Zamaninia, the nation’s deputy oil minister for international and commerce affairs. Speculators in the U.S. have raised bearish bets to an all-time high.

Oil slumped last week to levels last seen during the global financial crisis, while speculators increased bets on falling U.S. crude prices to an all-time high after the Organization of Petroleum Exporting Countries effectively abandoned production limits. The supply glut will persist at least until late 2016 as demand growth slows and OPEC shows “renewed determination” to maximize output, according to the International Energy Agency.

Market Gloom
“Gloom nourishes gloom,” said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt. “The market is fully acknowledging that OPEC is no longer in price-control mode or providing a floor, and that the group is unlikely to change that strategy any time soon.”

WTI for January delivery fell as much as 95 cents to $34.67 a barrel on the New York Mercantile Exchange and was at $34.80 at 11:46 a.m. London time. The volume of all futures traded was 35 percent above the 100-day average. The aggregate volume of monthly WTI contracts climbed to a record of 1.596 million on the Nymex on Dec. 8. Each contract corresponds to 1,000 barrels of oil.

Brent for January settlement dropped as much as $1.31, or 3.5 percent, at $36.62 a barrel on the London-based ICE Futures Europe exchange, the lowest since Dec. 26, 2008. The European benchmark crude was at a premium of $1.93 to WTI.

In the U.S., senate negotiators are nearing a deal to allow unfettered crude oil exports for the first time in 40 years, though differences remain on renewable-energy tax credits that Democrats are demanding in return, according to people close to the discussions.

U.S. Exports
While any agreement could still collapse in the coming days -- the deal faces opposition in the House -- lawmakers are weighing the extension of solar and wind tax credits for as long as five years in exchange for lifting the crude-export restrictions, which were established to counter the energy shortages of the 1970s.

Iran, which expects international sanctions over its nuclear program to be lifted by the first week of January, has already secured customers for its planned supply expansion, Zamaninia said in an interview in Tehran. The government is also preparing to offer oil and natural gas contracts to investors. The country pumped 2.8 million barrels a day last month, data compiled by Bloomberg show.

OPEC, which set aside its output quota at a Dec. 4 meeting, is displaying hardened resolve to maintain sales, the IEA said in its monthly report Friday. While the group’s strategy has affected other producers, triggering the steepest fall in non-OPEC supply since 1992, world oil inventories will probably swell further once Iran restores exports, predicted the Paris-based energy adviser to developed economies.

Libya Talks
World powers said they persuaded some of Libya’s feuding factions to form a new government of national unity and act against Islamic State. Libyan representatives at a peace conference in Rome on Sunday pledged to sign a UN-brokered deal Wednesday that would be “the only legitimate basis for a solution” to the country’s crisis, said U.S. Secretary of State John Kerry. The OPEC member’s oil production has shrunk to about 375,000 barrels a day from 1.6 million a day before the 2011 rebellion that toppled Muammar Qaddafi.

Money managers’ short position on WTI futures and options rose 5.8 percent to 181,849 contracts in the week ended Dec. 8, according to CFTC data Friday. Net longs retreated to a five-year low.

U.S. natural gas for January delivery tumbled to the lowest level since January 2002 amid forecasts that mild weather will persist through the end of the month. Futures fell as much as 5.5 percent to $1.881 per million British thermal units on the Nymex.

[Deleted]

6 years of inflation .... how is the real relative price? :X

~10%
http://www.usinflationcalculator.com/
$31.57 inflation adjusted

[Puupi]

6 years of inflation .... how is the real relative price? :X

Pretty much the same. There hasn't been much inflation....

[GennGreymane]

6 years of inflation .... how is the real relative price? :X

Inflation would be across the board. This was artificially held up by futures (Futures became especially important to price as the U.S destablized the region) and OPEC

[Malachi256]

Pretty much the same. There hasn't been much inflation....

wat?

Go here http://data.bls.gov/cgi-bin/surveymost?ap and select white bread, ground beef, eggs, and milk.

[Puupi]

wat?

Go here http://data.bls.gov/cgi-bin/surveymost?ap and select white bread, ground beef, eggs, and milk.

Well I was talking about overall inflation. Also this discussion is about oil price (not white bread, ground beef, eggs and milk), so how about you check the inflation for oil (which isn't that much, roughly 10% over 6 year period).

[Independent voter]

I can't believe the US is still talking about exporting oil. The restrictions on keeping oil in the US seem silly.

[GennGreymane]

I just wonder how long prices will stay where they are. I see it at 2.15 a gallon where I am (Long island, NY)

[Malachi256]

Well I was talking about overall inflation. Also this discussion is about oil price (not white bread, ground beef, eggs and milk), so how about you check the inflation for oil (which isn't that much, roughly 10% over 6 year period).

"Inflation for oil" is mostly a nonsense concept, especially when the post you were responding to was talking about general inflation, not the inflation of one particular good. Oil is currently low because new technology gave us access to previously unavailable petroleum reserves, and now we're in a supply glut/war that has greatly reduced the price.

But everyday inflation for the general public, especially for basic goods like food, has been terrible in the last ten years. So your statement of "there hasn't been much inflation" is also nonsense.

[Puupi]

"Inflation for oil" is mostly a nonsense concept, especially when the post you were responding to was talking about general inflation, not the inflation of one particular good. Oil is currently low because new technology gave us access to previously unavailable petroleum reserves, and now we're in a supply glut/war that has greatly reduced the price.

But everyday inflation for the general public, especially for basic goods like food, has been terrible in the last ten years. So your statement of "there hasn't been much inflation" is also nonsense.

Bullshit.

http://www.usinflationcalculator.com...flation-rates/

[Auxora]

Down to $1.84 here, and it's quite a bit cheaper than locally the more you head south.

Not really a problem, the oil companies have been rolling in the cash for years. And the benefits to the overall economy from cheaper fuel are better than the negative impact to the oil industry. This is just a down cycle. It tends to be the way most of these things go where high prices lead to increased volume as companies rush to increase production to cash in. There is always a delay since increasing production takes a while. And often, the increased production eventually outweighs high prices pushing them down. When it happens sometimes the late comers to increasing production really get hosed since they start spending money assuming the high original prices, and by the time they get the increased production implemented the prices have already come down. The same happened in gold mining/production that cut gold prices about in 1/2. Same with crop prices for farmers, which are down over half from a couple years ago.

[zenkai]

I just wonder how long prices will stay where they are. I see it at 2.15 a gallon where I am (Long island, NY)

Until OPEC can put American Oil out of business

[Allybeboba]

I just wonder how long prices will stay where they are. I see it at 2.15 a gallon where I am (Long island, NY)

Less than $1.50 here in Texas. Rumor has it, it could get get below $1.

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Until OPEC can put American Oil out of business

Yes, I read in the newspaper every week about small companies going out of business.

[GennGreymane]

Less than $1.50 here in Texas.

Nice. Although L.I is an expensive place. This is cheap as fuck.

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Until OPEC can put American Oil out of business

So good luck on that!

[Rotcus]

Down to $1.84 here, and it's quite a bit cheaper than locally the more you head south.

Not really a problem, the oil companies have been rolling in the cash for years. And the benefits to the overall economy from cheaper fuel are better than the negative impact to the oil industry. This is just a down cycle. It tends to be the way most of these things go where high prices lead to increased volume as companies rush to increase production to cash in. There is always a delay since increasing production takes a while. And often, the increased production eventually outweighs high prices pushing them down. When it happens sometimes the late comers to increasing production really get hosed since they start spending money assuming the high original prices, and by the time they get the increased production implemented the prices have already come down. The same happened in gold mining/production that cut gold prices about in 1/2. Same with crop prices for farmers, which are down over half from a couple years ago.

This isn't just a downturn ala typical markets. Oil production has been artificially held low by a cartel (OPEC) to increase prices. Saudi Arabia realized it was going to lose vast market share not only because the barrier to entry to tap additional oil reserves became more reasonable to overcome (such as fracking) but also because alternative fuel sources were being heavily invested in because they just made more sense with oil as high as it was. So OPEC nations would eventually lose more money in the long run if they didn't increase supply in order to decrease price. Again, this is not a typical "market downturn" but a calculated response that just made common sense. Now if they're real smart, they'll take that money they're getting now and invest in alternative energy sources themselves to be poised to hold the energy market when oil is less available. It's not as desirable in the short-term as lining your pockets and building posh cities...but it's better long-term for the people.

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Until OPEC can put American Oil out of business

It's not just about oil, but alternative fuel sources too. Oil was so expensive that the barriers to entry were down for R&D into alternative fuel sources as well as alternative oil reserves.