OIL PRICE CRISIS: Prices PLUMMET as analysts warn they can ‘only go DOWN’

The energy market has seen a wave of selling after reports of surging supplies, forecasts of record US and Russian output and fear of a possible economic slowdown in 2019. And analysts believe the coming year will add even more downward pressure to the value of oil per barrel. Tamas Varga, senior analyst at PVM Oil Associates, said: “The only way is down. 

“There are lots of variables regarding next year’s oil balance but based on available data, information and sentiment, it is fair to say that any price rally will be met by fierce resistance from the sellers’ side.”

Investors’ confidence is low, with many fund managers expecting global growth to weaken over the next 12 months, the Bank of America Merrill Lynch’s December investor survey shows.

Bob Yawger, director of futures with Mizuho in New York said: “There was a flood of supply side news yesterday which, in combination with the demand destruction that the stock market slide implied, got us below $50 a barrel for US crude, and that gave us a strong sell signal.” 

Analysts at UBS said in a research note published Monday confirmed this bleak view, saying: “For a brief period, the energy market in 2018 bore all the hallmarks of having stabilised with some sense of normalcy returning but all that changed in October.

“Uncertainty and volatility reign once again.”

Among the factors fuelling uncertainty there are the fact that Britain’s largest oilfield, Buzzard, restarted production and an increasing supply.

Moreover, the US government said output from shale would top 8million barrels per day (bpd) this year and data suggested US crude inventories would further rise this week. 

Inventories at the US storage hub of Cushing, Oklahoma, alone grew more than 1 million barrels between December 11 and 14, traders said. 

And Russian oil output hit a record 11.42million bpd this month, as reported by Reuters.

Earlier this month OPEC and non-OPEC members struck a deal in a bid to boost the market, with the 15-OPEC members saying they would reduce its output by 800,000 bpd, while Russia and the allied producers will contribute a 400,000 bpd reduction.

But the agreement, which come into force in January, has so far not produced the effect they wanted. 

Global benchmark Brent lost $3.35, or 5.62 percent on Tuesday, to settle at $56.26 a barrel by the end of the day.

During the session, Brent hit a 14-month low of $56.16.

US crude oil performed even worse, falling $3.64, or 7.3 percent, to settle at $46.24 a barrel, the weakest since August, 2017.

The session low was $46.11 a barrel.