|December 22, 2015|
Oil Prices Slump to 11-Year Lows in Asia and Europe
|Oil prices hit 11-year lows in Asia and Europe on Monday, as a glut of crude on world markets and the recent global climate accord continue to depress fossil-fuel prices.|
Brent crude oil, the international benchmark, settled at $36.51 a barrel on Monday in Europe.
Analysts say there is little to restrain continued price declines in the near term. Prices are down about 15 percent so far in December, after an OPEC meeting failed to produce measures to restrain record-high production. That meeting was quickly followed by the United Nations climate accord in Paris, which aims to reduce the world's reliance on oil and other carbon-emitting fuels.
The latest factor weighing on prices has been unusually warm weather in the United States and Europe, which is reducing winter demand for heating oil and leading to rising stockpiles of oil products. The expectation that the American government may soon lift a decades-old ban on exports of crude from the United States may also be affecting prices.
"We are probably going to see the weakness run at least through January," said Richard Mallinson, an analyst at Energy Aspects, a London-based market research firm.
Analysts say that crude oil prices are likely to remain under pressure in the spring, when refineries typically shut down for maintenance, weakening demand.
While few analysts had expected OPEC to decide to cut production when the group met in Vienna this month, the signals from the meeting appeared to show that the cartel, which accounts for about 30 percent of world oil production, was not even close to coming up with a plan to try to manage the market.
"Even compared to the low expectations, the meeting sent out negative signals," Mr. Mallinson said. "There was no unity and nothing that looked like the basis for more coherence next year."
While disgruntled OPEC members like Venezuela muttered about the "catastrophe" caused by rock-bottom oil revenues, Saudi Arabia, Iraq and other gulf countries are expected to continue to produce at or near record levels, and new supplies are expected from Iran, assuming international sanctions are lifted next year.
Analysts say that Saudi Arabia's strategy of keeping production high to maintain market share and weaken higher-cost producers is showing some signs of working. For instance, the International Energy Agency, the Paris-based monitoring organization, forecasts that supplies from outside of OPEC will decline next year.
Still, those prospects have not been enough to shore up prices. Production in the United States remains strong, as higher production from projects in the Gulf of Mexico offsets declines in shale oil production on shore, where low prices have discouraged some energy companies from investing in new drilling. Russia, meanwhile, is essentially shrugging off the impact of Western sanctions over Ukraine and is still producing at high levels.
In a recent report, the International Energy Agency said it expected global inventories to keep growing at least until late 2016, although at a much slower pace than this year. "As inventories continue to swell into 2016, there will still be a lot of oil weighing on the market," the agency said.