The worldwide oil price is facing further downside pressure. After the interest rate hike, Brent crude future prices dipped further by 2% to $36.05 per barrel level on Monday. It was the lowest price in over eleven years as the supply remains in excess compared to the demand. The trend is unlikely to change in the upcoming year too. The threat of the oil pricing dropping to a level of $20 a barrel looks to be a possibility now unless anything drastic happens to the contrary to arrest the downtrend.
Oil Production At Record Highs
There appears to be a lack of coordination or cooperation among the oil producing companies, as well as, countries on oil production. As a result, oil-producing is reaching a record high. On top of this, new oil will likely to boost the market supply from countries like Iran, Libya, and the United States. That would only suggest that the downtrend in global oil price is hard to be checked and is poised for the biggest drop in monthly percentage in the seven-year period. Until now, it lost over 18.5%.
There is little doubt that consumers’ would cheer the downtick in oil prices since it would enable them to limit their spending on gasoline and spend more on other items. However, the oil producers have slashed their spending estimations for the next year apart from announcing a reduction in thousands of workforce. Similarly, the oil exporting nations suffered the worst as they were focused on retaining their market share.
Hopes Of Rebalance In 2016 Suffers Setback
Meanwhile, Morgan Stanley (NYSE:MS) indicated that any hope of a rebalancing of oil in the next year suffered a serious setback in the face of continued drop in prices. The next year will see a tough competition for grabbing market share as the United States lifted the four decade-old restriction on crude exports. Its entry into the global markets might result in further dragging the prices and OPEC has already indicated that it was keen to retain its share. For that purpose, it even scrapped the ceiling on producing oil.
