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 Oil production is running close to record highs and, with more
barrels poised to enter the market from the likes of Iran, the
United States and Libya, the price of crude is set for its largest
monthly percentage decline in seven years.
While consumers have enjoyed lower fuel prices, producers have cut
spending and thousands of jobs and the world's richest exporters
have been forced to revalue their currencies, sell off assets and
even issue debt for the first time in years as they struggle to
repair the holes in their finances.
OPEC, led by Saudi Arabia, will stick with its year-old policy of
compensating for lower prices with higher production, and shows no
signs of wavering, even though every dollar lower in the oil price
brings fresh pain to its poorer members.
Brent futures fell by about 2 percent to as low as $36.05 per barrel
on Monday, their weakest since July 2004, and were down 41 cents at
$36.47 at 1115 GMT.
Brent crude prices have dropped by nearly 19 percent this month,
their steepest fall since the collapse of failed U.S. bank Lehman
Brothers in October 2008.
U.S. crude futures dropped 31 cents to $34.42 a barrel, their lowest
since 2009.
"With OPEC not in any mood to cut production ... it does mean you
are not going to get any rebalancing any time soon," Energy Aspects
chief oil analyst Amrita Sen said.
"Having said that, long-term of course, the lower prices are today,
the rebalancing will become even stronger and steeper, because of
the capex cutbacks ... but you're not going to see that until
end-2016."
Investment bank Goldman Sachs believes it could take a drop to as
little as $20 a barrel for supply to adjust to demand.
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The price of oil has halved over the past year, dealing a blow to
economies of oil producers such as Nigeria, which faces its worst
crisis in years, or Venezuela, which has been plunged into deep
recession.
Even wealthy Gulf Arab states have been hit. Last week Saudi Arabia,
Kuwait and Bahrain raised interest rates as they scrambled to
protect their currencies.
"Really, I wouldn’t like to be in the shoes of an oil exporter
getting into 2016. It's not exactly looking as if there is light at
the end of the tunnel any time soon," Saxo Bank senior manager Ole
Hansen said.
Reflecting the determination among the biggest producers to woo
buyers at any cost, Russia now pumps oil at a post-Soviet high of
over 10 million barrels per day (bpd), while OPEC output is close to
record levels above 31.5 million bpd.
(Additional reporting by Henning Gloystein in SINGAPORE; Editing by
David Goodman and Anna Willard)
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