Where's The Bottom For Oil?

Since November 2014 when OPEC decided against a production cut, crude prices have been rapidly declining, oil companies have been struggling to stay afloat and share markets have been pummeled. The volatile trading environment and uncertainty about the long-term effect crude prices could have on the global economy has markets all wondering the same thing — where’s the bottom?

Prices Continue Declining

When prices first started to slide, there was talk of $70 per barrel oil being the breaking point that would cause producers to start cutting back. However, with prices recently below $50, analysts at Energy Aspects Ltd told Bloomberg that markets should prepare for the possibly of a further slide to $30 before bottoming out.

Related Link: U.S. Stock Futures Up; Crude Oil Slides Below $45

Supply Still Plentiful

Although U.S. shale-oil drilling has begun to decline, the cutback won't make a measurable dent in supplies for at least a few months. Meanwhile, producers that are able to keep their costs below $40 or have secured a forward price will continue operating at current levels in hopes of increased demand.

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OPEC Producers Push Others Out

Gulf Producers have been firm in their decision to step back from their role balancing supply and demand, and in doing so have put a great deal of pressure on non-OPEC suppliers. This week, officials from the United Arab Emirates confirmed they will maintain their levels of production and even offer discounts to some members in an effort to regain marketshare. The kingdom also commented that it expects non-OPEC suppliers to fall apart before OPEC producers do.

On Thursday, Iraq announced its plans to increase exports in February to record high levels. The nation is planning to ship 3.3 million barrels per day next month, a marked increase from January’s 2.7 million barrels per day.