Crude Oil Stays Below $30 a Barrel
February 03 2016 - 2:00AM
Dow Jones News
Crude-oil prices stayed below $30 a barrel in early Asian trade
Wednesday as anticipation of bigger U.S. crude stockpiles deepened
the already-bearish outlook on oil.
On the New York Mercantile Exchange, light, sweet crude futures
for delivery in March fell below the $30 mark overnight and traded
at $29.68 a barrel at 0230 GMT, down $0.20 in the Globex electronic
session. April Brent crude on London's ICE Futures exchange fell
$0.10 to $32.62 a barrel.
According to estimates by industry group American Petroleum
Institute, the U.S. crude stockpiles likely grew by 3.8 million
barrels in the week ended Jan. 29 while a Wall Street Journal
survey of analysts tips a 3.5 million-barrel increase. The official
data will be released by the Energy Information Administration
later today.
Oil prices rallied last week on speculations that Russia and the
Organization of the Petroleum Exporting Countries could impose a
collective supply cut to prevent prices from falling further.
However, Saudi Arabia has yet to show signs of budging on its
output, so the market is again being weighed by an expanding global
glut of oil.
"This is a correction from the recent gains which were boosted
by sheer speculations of more stimulus measures and a possible
production cut," said an energy analyst based in Australia.
"This just goes to show you how fragile the market is right now,
that any news, even though not fully confirmed, can stir up
volatility," he added.
Oil prices have been on a downtrend since late 2014 when OPEC
sought to defend its market share from their Russian and U.S.
rivals. The move aimed to knock out high-cost competitors but
prices have suffered in the process.
The "no-cut" tactic has proven to be a boon for consumers,
especially drivers who are enjoying cheaper gasoline. But oil field
operators across the globe are left struggling, with many incurring
losses.
Exxon Mobil Corp., the world's largest publicly traded oil
company, said fourth-quarter profit tumbled 58%, to the lowest
level since 2002, as the worst oil crash in decades hampered
drilling operations. Company's chief executive Rex Tillerson said
the company would slash spending by 25% this year.
Similarly, the London-based BP PLC announced a $5.2 billion loss
for last year and said the company plans to cut 7,000 jobs by 2017.
Chevron Corp. of San Ramon, Calif. said last week it would cut
spending by $9 billion and lay off 4,000 workers this year after
reporting a loss of more than half a billion dollars for the
previous quarter.
The massive plunge in spending by oil companies, however, is
seen as a silver lining by many market observers, who said once the
cuts trickle down to the production front in one or two years,
global supply will shrink and prices will turn upward.
But with Iran ramping up its production and non-OPEC producers,
such as Russia, still pumping at full speed, many say without a
drastic cut in production near term, a price rebound remains in the
far distance. Russia this week reported that its January crude
production grew to 10.88 million barrels a day, up from 10.83
million barrels a day in December. Iran also pledged that it
wouldn't entertain a production cut until its exports has risen by
1.5 million barrels a day.
"Yes, low prices will eventually cure low prices and the market
will rebalance, but this would happen much sooner if OPEC
production weren't still rising," said Tim Evans, an energy analyst
at Citi Futures.
Bradley Olson and Chelsey Dulaney contributed to this
article
Write to Jenny W. Hsu at jenny.hsu@wsj.com
(END) Dow Jones Newswires
February 03, 2016 01:45 ET (06:45 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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