No relief in sight for oil industry’s pain

Investors are now confident that OPEC is attempting to pump out the competition, and hence the prices of crude oil are expected to slide downwards way into the next year as well, said Tim Evans, an energy analyst with Citi Bank.

Benchmark Brent, near $37 per barrel, traded just $1 away from those lows reached last week as the primary supportive factor – an expected cold snap in Europe and the United States – was forecast to be short-lived.

Crude oil prices face further downside risk in the first half of 2016, with OPEC holding on to hopes of pumping the competition out of business, a Citigroup analyst said Wednesday. Nymex and Brent prices have fallen 31% and 36%, respectively, this year and many analysts are predicting a “lower for longer” scenario.

Then there’s the actual break-even cost of getting the stuff out of the ground, and many oil producing countries – including even Saudi Arabia – are unprofitable at current prices.

Crude inventories in the United States rose 2.6 million barrels last week, the U.S. Energy Information Administration said. Earlier in 2014, Mr. Naimi was reported to have said that the highest exporting member of the Organization of Petroleum Exporting Countries (OPEC) would not support prices by lowering its production rates, allowing other countries to gain market share.

Gasoline futures gained 3.71 cents, or 3%, to $1.2671 a gallon.

U.S. crude stockpiles rose by 2.63 million barrels through December 25 and production increased for a third week, the EIA said in a report on Wednesday.

Prices had been volatile during the holiday-shortened final week of 2015 but remained near multi-year lows in the face of indications a global crude supply glut will continue into next year.

The American Petroleum Institute releases its stockpiles report later Tuesday and the more closely watched US Department of Energy (DoE) report comes out Wednesday. Cushing inventories climbed to 63 million barrels, the highest level since the EIA began publishing weekly data in April 2004.

By the end of 2016, I’d be very surprised if the oil price is not significantly higher than it is today – $50 a barrel at least, maybe $60. Meanwhile, the benchmark USA oil futures contract ended down $2.36, or 4.2%, at $54.11 a barrel on the New York Mercantile Exchange. While it has fallen from a peak of 9.6 million barrels a day in April, output has remained stable at around 9.1 million barrels a day in recent months.

The Iranian government expects a crude price of $40 in 2016, and Saudi Arabia has announced that it will drastically trim public spending, but the Brent barrel, the reference for Europe, is still at its lowest level for the last 11 years.