Yesterday the price had tumbled about 6.3 percent on a report from the U.S. Energy Information Agency that American oil inventories were 413.06 million barrels in the week ending January 30th, the highest level since these records began in 1982.
Since the low last Thursday the January 29th at $43.83 the price of a barrel of West Texas Intermediate has rocketed higher. It gained 8 percent on Friday, 4 percent on Monday and 6.5 percent on Tuesday, lost the above mentioned 6.3 percent and is currently (3:30 pm), about 4 percent higher today.
Plentiful supplies in the world market combined with continued high level of production of shale oil in the United States, weakening global demand and the strong dollar have placed heavy pressure on the price of crude.
Oil is priced in dollars so any increase in the value of the dollar tends to reduce the dollar price of oil.
The International Energy Agency reported last month that U.S. companies had lowered their capital expenditure plans for 2015, with estimates for decreases ranging between 10 percent and 50 percent. BP announced recently that they had reduced their capital spending from $26 billion to $20 billion.
The breakeven price for many American shale drillers is somewhere between $50 and $80 dollars a barrel. If oil stays near $50 many oil companies could come under financial stress.
The Organization of the Petroleum Exporting Countries (OPEC) has refused to cut production in order to boost global prices despite the efforts by several members to get the cartel to do so. The finance minister of Saudi Arabia, the group’s largest producer, Ibrahim Abdulaziz Al-Assaf, said on Thursday reiterated that his country had no plans to give in to demands to decrease output. "We (have) built in the buffers to help us in sustaining our policies and not disrupting them, so I am comfortable that we will be able to continue that," he told CNBC.
Chief Market Strategist
WorldWideMarkets Online Trading