Oil falls below $45
WTI is at $44.91 a barrel and Brent is at $46.04 a barrel
WTI crude for February delivery fell below $45 a barrel on Tuesday morning for the first time since April 2009 and was trading at $44.91 a barrel at midday GMT. Brent crude futures lost around 3 percent in the morning session and were trading at $46.04 a barrel. Both have crashed by around 60 percent since mid-June last year.
Investment banking firm Goldman Sachs has cut its 2015 oil price forecast to $40 a barrel as prices dropped below $50 on world markets Monday.
The continued Weak global demand and growing supplies remains the core reason for the continued drop in oil prices. It is believed Gulf states and U.S. shale producer’s reluctance to cut back on production is the main reason for the excess crude supply. Its been reported that OPEC would only cut back if producers in the U.S. did something similar but this is unlikely to happen at this moment.
With crude prices continued downward spiral due to global oversupply, the situation is bound to get worse for countries such as Venezuela and Nigeria in particular especially following a recent US Department of Commerce guidance that effectively opens the door to US exports of ultra light crude. After approving the export application of two Texas producers, the door to US condensate exports is now wide open.
The US guidance states that the decades old ban on the export of crude oil, stemming from the Arab oil embargo of the 1970s, remains in place but condensate that has been processed through a crude oil distillation tower is a petroleum product and so is not subject to the ban. There are now fewer restrictions to the export of petroleum products in the US.
Condensates are relatively light hydrocarbon liquids that are present as gaseous components in the raw natural gas produced from many natural gas fields. Recovered mainly from gas reservoirs, condensates are very similar to light stabilized crude oil.
The continued growth of US shale production has seen an increase in light crude oil inventories in the US. It is estimated that as much as 12 per cent of current US oil production could qualify as condensate. This means that shale production and the opening of US oil exports to a global market will have a further impact on the global market.
Industry analysts are predicting that with the opening up of US condensate exports, oil prices are unlikely to make a recovery anytime soon.