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Petroleum industry

Oil Prices Rally Amid Fresh Warnings of Prolonged Glut

Strategic Insights

— 2 min read

Oil prices rebounded on Monday after narrowly avoiding 2015 lows the previous week, as investors seized on lower prices to add to their portfolios, despite warnings that the oil glut could persist into 2017. Benchmark West Texas Intermediate crude futures surged $1.09 to $44.96 per barrel, while the Dow Jones industrial average rose 241.79 points to 17,615.17, and the Standard & Poor's 500 index gained 26.61 to 2,104.18. International benchmark Brent crude added $1.80 to $50.41 per barrel. However, a return to substantially higher oil prices appears far off, with financial services firm Raymond James forecasting that it will be 2017 before oil returns to the $60 level it hit as recently as June.

Key Takeaways:

  • Raymond James lowered its 2016 oil price forecast from $65 to $55 per barrel, citing a prolonged oil glut.
  • U.S. companies have managed to pump more oil on slimmer budgets, while international production has surged, particularly in Saudi Arabia and Iraq.
  • Global oil demand has stagnated due to economic concerns in Europe and China.
  • The oil price drop is having a significant impact on the U.S. oil and gas industry, with job cuts continuing, including 110 layoffs at National Oilwell Varco.
  • Saudi Arabia's oil production hit a record 10.24 million barrels per day in the second quarter of 2015, up 740,000 barrels per day from the same quarter in 2014.
  • Iraq's oil production has also increased, with an estimated 4 million barrels per day, up from an average of 3.33 million barrels in the second quarter of last year.
  • Iranian crude oil could add as many as 600,000 additional barrels per day to markets next year.

Statistics:

  • U.S. benchmark West Texas Intermediate crude futures rose by $1.09 to $44.96 per barrel.
  • The Dow Jones industrial average rose 241.79 points to 17,615.17.
  • The Standard & Poor's 500 index gained 26.61 to 2,104.18.
  • International benchmark Brent crude added $1.80 to $50.41 per barrel.
  • Raymond James forecasts oil prices to average $50 per barrel this year.
  • Moody's Investors Service predicts $52 per barrel U.S. oil in 2016.
  • Saudi Arabia's oil production increased by 740,000 barrels per day in the second quarter of 2015 compared to the same quarter in 2014.
  • Iraq's oil production has increased to an estimated 4 million barrels per day.

Sources:

  • "Oil prices rally amid fresh warnings of prolonged glut" (no date or publication date mentioned)
  • Raymond James analysis (no date or publication date mentioned)
  • Moody's Investors Service (no date or publication date mentioned)
  • Goldman Sachs (no date or publication date mentioned)
  • Global Data Point (no date or publication date mentioned)
  • SyndiGate Media Inc. (no date or publication date mentioned)

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