What's happening to oil? And what else could happen in the coming days-months? Obviously it is easier to answer the first question but also on the second it is possible to make some scenario hypotheses. The prevailing opinion is that the fall has not yet reached its end and in the worst case scenario it could even sink below $30.
A vertical collapse
Just look at the curve of the WTI (West Texas Intermediate, the reference crude oil in the USA) to clearly visualize the vertical drop in prices from the highs of June (62 dollars against about 80 a year ago). Today the WTI is still traveling in decline below 42 dollars a barrel, at its lowest for 6 and a half years, and does not seem to have reached rock bottom yet. The curve of Brent (the crude oil of reference for Europe) is less vertical, nevertheless the descent is clear and evident: from 67 dollars today it has dropped to below 50 (and a year ago prices were traveling at 110-115 dollars a barrel ). Weaker-than-expected data on the Japanese economy also triggered today's selling-off but other structural data is also affecting investors.
The surplus rises and OPEC increases production
In particular, there are two factors that are further influencing operators. On the one hand, the announcement given by Iranian Oil Minister Bijan Namdar Zanganeh that Iran is ready to restart production and that a week after the removal of export restrictions the country could put on the market 500.000 barrels per day. Figures to be taken with caution but which nonetheless give a sense of Iranian intentions. Also the Iranian representative in Opec, Mahdi Asali - quoted by Bloomberg - also said that theOPEC could bring the cartel's production to 33 million barrels, after the end of the sanctions, reaching an all-time record (in July the average was 31,5 million barrels based on OPEC data). According to Bloomberg data, the world oil market already records a surplus of 3 million barrels, with Iraq and Saudi Arabia responsible for the overproduction of the last 6 months.
From the US front (which is the world's largest consumer of oil) then comes the news that, for the fourth consecutive week, the number of shale drilling platforms is increasing. Baker Hughes reported that they have risen to 672 despite the total figure having dropped by 60% compared to December 2014. Pressure is also growing on the Washington government from US companies, including ExxonMobil and ConocoPhilips, to lift export restrictions. And according to Petroleos Mexicanos, the United States has authorized the release of oil to Mexico after a 100.000-year ban and is preparing to exchange more than XNUMX barrels of light oil against the heavier Mexican crude.
Forecasts
Citigroup has reduced its estimates for the WTI to $48 both for this year and for the next but does not exclude a further 30% reduction which would cause prices to slide to 30 euros at the end of the year. "The OPC's euphoria about its ability to win the market share war could be a key factor, along with a benign geopolitical backdrop on the supply side," said Edward Morse, Citigroup's head of commodity research. ».
There are those who go even further as Gary Shilling, at the head of the investment house of the same name. Estimates of him indicate a oil at $20 a barrel, or even below. This is because in his opinion the war between the producing countries will push them to pump crude oil until prices fall below production costs.
