US crude oil and Brent each dropped more than $2 per barrel to a new low of five years amid rising numbers of predictions that oversupply could extend into 2015.
Kuwait, OPEC member, said on that it expected the prices to remain low for around six months.
Price has continued declining after a report from Morgan Stanley revising the oil prices estimates lower. Morgan Stanley said in the December 5 report that prices might fall to a low of $43 per barrel next year. The US investment back cut the average Brent base-case outlook for 2015 to $70 per barrel by $28 and to $88 per barrel by $14 for 2016.
Reuters quoted Adam Longson, Morgan Stanley analyst as having said, “Without OPEC intervention, markets risk becoming unbalanced, with peak oversupply likely in the second quarter of 2015.”
January Brent dropped to $66.62 per barrel by $2.42, the lowest from October 2009. US crude dropped to $63.55 per barrel by $2.27, a session low, the lowest from July 2009.
Tariq Zahir of Tyche Capital said, “When these things go lower, they tend to go much farther than people anticipated. I definitely think we’re going to keep heading lower, everyone is trying to pick a bottom.”
Gene McGillian, senior analyst at Tradition Energy was quoted by Bloomberg Businessweek as having said, “The market continues to search for a bottom but it doesn’t feel like we’ve found one. You’ll continue to see longs exist the market. You don’t want to catch a falling knife.”
In last month’s OPEC meeting, Saudi Arabia resisted calls from poorer members to reduce production, thus driving a further drop in prices, which have declined more than 40% since June.
The US shale industry is yet to be hit by the decline in crude prices with three US oil drilling rigs being added the past week.
To contact the reporter of the story: Jonathan Millet at firstname.lastname@example.org