Brent crude, that benchmark price we most often use as a stand-in for the cost of a barrel of oil, is trading below $50, its lowest level since March and just a scant $4 away from its January nadir. That’s a far cry from its $106.85 price one year ago, but it also represents a retreat from what appears to have been a temporary rebound this spring. Reuters reports:
Brent crude futures were down 35 cents at $49.24 a barrel at 1319 GMT after dipping to $49.02 on Wednesday, the lowest since Jan. 30. U.S. crude was down 64 cents at $44.51 a barrel, just off an intraday low of $44.46.
“Prices are likely to consolidate or weaken further,” Carsten Fritsch, an oil analyst at Commerzbank, said. “The perception is that over-supply will be there for much longer.”
American shale production has contributed to an oil glut, and OPEC has refused to lower its own production to help stabilize the market. Instead, the cartel has pursued a Saudi-led strategy of keeping output at or near record levels in an attempt to fight for its share of a suddenly quite crowded market. With a flood of Iranian crude in the offing as the West prepares to lift sanctions, the world’s supply doesn’t seem to be tapering off anytime soon.
Crude buyers won’t be sorry to see this market retrenchment, but it’s a very different story if you’re trying to sell. In the U.S., shale wildcatters—a critical component of the fracking boom—are being forced to sell off oil fields, their most important assets, to stay afloat. Meanwhile, Saudi Arabia is planning to issue $27 billion in bonds by the end of the year to cope with plunging prices. For producers around the world, those heady days of $100+ per barrel oil are a distant memory.