Oil prices still in decline even as US cuts production

Oil prices still in decline even as US cuts production

Oversupply concerns are keeping oil prices below $50 a barrel.

High supply and worries over the growth of the demand for oil in emerging countries is keeping oil below the $50 a barrel mark, according to an article on reuters.com.

The price of crude oil is looking like it will finish the month of September down about 11 percent.  This will be the 11th monthly decline out of the last 15 months.  In the last 15 years, oil prices have recorded a gain in the month of September only four times, so the result was not totally unexpected.

Analysts have already cut their forecasts for this year and the next, but some feel the downward price spiral is about to end, despite lower expectations for next year.

Bjarne Schieldrop, chief commodity analyst at SEB, said “We’ve been discussing the possibility that oil needs to move down to $30, but I think that is only if you run out of storage capacity and given that (there is) still quite substantial storage capacity, in my view you still have flexibility.”

He adds, “If you look on the forward curve, buyers are increasingly (present) at the front end of the curve after having been burned heavily by … longer-dated contracts.”

Investors are expecting the International Monetary Fund (IMF) to revise its global economic growth outlook downward due to the weakness of emerging markets.

Oil and gas producers in the United States have reduced their drilling plans for at least four straight weeks, which is considered a sign of weak prices.

Oversupply and growth demand concerns have caused the value of a barrel of oil to drop some 50 percent over the last year.

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