Oil market trend downwards, not doomsday / News / The Foreigner

Oil market trend downwards, not doomsday. Companies are axing costs, staff, and delaying projects among oil price falls. Nobody knows at what price they will meet the ocean floor, but panic should be taken under advisement, an oil analyst says. The per barrel oil price has fallen some 35 per cent since the summer. It was up at USD 110 a barrel; it fell to USD 65, Wednesday, the lowest for five years. Financial analysts are calling on Norges Bank to cut the basic rate of interest at its key policy rate meeting today.

oil, gas, energy, opec



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Oil market trend downwards, not doomsday

Published on Thursday, 11th December, 2014 at 06:50 under the news category, by Michael Sandelson   .
Last Updated on 11th December 2014 at 12:33.

Companies are axing costs, staff, and delaying projects among oil price falls. Nobody knows at what price they will meet the ocean floor, but panic should be taken under advisement, an oil analyst says.

A Pumpjack in West Texas
A Pumpjack in West Texas
Photo: Public Domain/Eric Kounce


The per barrel oil price has fallen some 35 per cent since the summer. It was up at USD 110 a barrel; it fell to USD 65, Wednesday, the lowest for five years.

Financial analysts are calling on Norges Bank to cut the basic rate of interest at its key policy rate meeting today.

Oil industry giant Statoil has implemented a major round of cost cuts to save USD 5bn over the next three years, and BP says it is examining costs. The oil service sector is experiencing knock-on effects.

Austerity measures, which include delaying projects and cancelling drilling assignments, have meant that some 10,000 oil service industry jobs have disappeared this year. There have also been mergers.

Investment levels will also mean more job losses next year. DNB Markets expects that these will fall 15 per cent in 2015, and continue to decrease by a further 5 per cent in 2016 and 2017.

The Organization of Petroleum Exporting Countries (OPEC) rejected calls to cut production at its meeting last month.

Nordea Markets oil analyst Thina M. Saltvedt thinks that North Sea oil will be traded at USD 76 per barrel in 2015, and USD 73 per barrel the following year.

“Things in the oil market will get worse before they get better. Prices will probably fall a little more,” she told Finansavisen.

“There is market turmoil and uncertainty, and OPEC not cutting production has confused the markets,” Ms Saltvedt said to The Foreigner. “Many companies are still worried, and we might see new cuts, with new projects put on hold.”

“The situation is problematic for Nigeria, Venezuela, Iran, and Iraq, and they might call for an emergency OPEC meeting. Prices could sink to USD 40 per barrel if OPEC solidarity breaks.”

Companies selling their shares in oil, no longer wishing to invest in the sector what with the downward price spiral, also has a knock-on psychological effect.

“When the big leave; the smaller follow. At the same time, it’s not possible to see where the oil price will reach bottom – USD 40, 50, 60 dollars a barrel? It could be anywhere,” comments Ms Saltvedt.

When might we see situation improve regarding both an OPEC production cut and increase in per barrel prices?

“Saudi Arabia is the only player to listen to, which the markets will do. Even if Nigeria and Iran say they will cut production, it won’t be big enough for the market.”

Norwegian Minister of Finance Siv Jensen recently called some of the major oil companies in for a meeting as the oil prices has fallen appreciably. The government has cut petrol-related taxes, but the price at the pumps has not fallen substantially. What are your remarks about that?

“There were no clear conclusions whether they are cooperating on price or not, but it was more for a clarification of what is happening. It’s difficult to say. However, fuel, which is bought on the international market, is priced in US dollars. The exchange rate has a lot to say for what the per-litre selling price is in Norway,” concludes Ms Saltvedt.




Published on Thursday, 11th December, 2014 at 06:50 under the news category, by Michael Sandelson   .
Last updated on 11th December 2014 at 12:33.

This post has the following tags: oil, gas, energy, opec.





  
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