Are we about to see oil trading in the $30s? A number of analysts think so. WTI crude, America’s benchmark, is trading just above $40 per barrel today, and Brent is a scant $6 higher. With the global glut looking to persist into the fall when seasonal demand slackens, it’s not hard to imagine prices dropping further below their current six year lows. Bloomberg reports:
Oil could fall to lows last seen during the global financial crisis amid a persistent supply surplus, Citigroup Inc. said.
“Balances point to further oversupply throughout 2015 begging the question how low can oil go,” Citigroup analysts led by Seth Kleinman said in an e-mailed report Wednesday. The U.S. crude price of $32.40 a barrel reached in 2008 “is a conceivable reality.”
Even as prices plummet, output is growing from Canada’s oil sands while production from U.S. firms and OPEC alike is holding steady at remarkably high levels. With the prospect of resurgent Iranian crude flooding the market in the coming months, it’s no wonder prices continue to tick downwards.
That downward trend has companies ruthlessly cutting capital expenditures in an attempt to balance the books, and a federal auction of offshore blocks in the Gulf of Mexico yesterday attracted the lowest interest in nearly three decades. Even as the industry struggles to adapt, it seems clear we haven’t hit rock bottom yet. “To end this vicious downward spiral, crude prices need to head lower”, stated chief oil analyst at Energy Aspects Amrita Sen. It looks like that’s exactly where they’re headed.