Oil price rout continues as analysts expect further declines

iNVEZZ.com, Wednesday, January 07: Prices of crude oil futures have continued their plunge so far in today’s trading session. According to analysts, a buildup in the global supply glut means that more declines are likely before a rebound.

Brent for February delivery had fallen nearly a dollar, or 1.94 percent, to $50.11 as of 07:41 GMT on the London-based ICE Futures Europe exchange. It fell as low as $50.03 in earlier trading, the lowest since April 2009. The benchmark slumped 48 percent last year, its biggest yearly decline since the 2008 financial crisis, as OPEC opted not to reduce production amid a battle for market share. Reuters cited a note from ANZ bank as saying:

“The risks to oil prices remain skewed to the downside in the near term, […] While we expect high-cost shale producers to be the first to cut production, this is unlikely to occur until the middle of 2015”.
February WTI futures, had fallen $1.59 percent, or 76 cents, to $47.17 in electronic trading on the NYMEX in New York as of 07:41 GMT. Yesterday, the American Petroleum Institute (API) reported a surprise drop of four million barrels in US crude-oil inventories for the week ended 2 January. The Wall Street Journal quoted Citi Futures strategist Timothy Evans as saying that “while a confirmed draw [down] in US crude-oil stocks might be viewed as supportive relative to market expectations, we still wouldn’t count on a bullish price reaction.”

Bill O’Grady, chief market strategist at Confluence Investment Management, was cited by Bloomberg as observing: “The path of least resistance is lower […] There is no bullish news. OPEC refuses to cut production and there is no evidence of falling production outside of OPEC.”
Market participants will be eyeing the weekly inventory report from the US Energy Information Administration (EIA), due at 15:30 GMT. A Bloomberg News poll has it that crude inventories rose by 700,000 barrels in the seven days ended 2 January.
Based on the two front month contracts, Brent was trading at a premium of $2.94 to WTI as of 07:41 GMT, down 17 cents from yesterday’s $3.17 close. Last Wednesday the premium ended at $3.84.