The oil story, during the recent past, has been a daily rerun with downward pressure on the price as a result of oversupply coupled with analyst predictions of a decline in demand which are also becoming predictions for a further drop in prices.
Oil futures settled below $42 per barrel on Monday as September West Texas Intermediate crude (CLU, -0.88%) dropped by 63 cents or 1.5% to finish at $41.87 a barrel on the NYMEX. This marks the lowest settlement figure for a front month contract since 3 March 2009.
Meanwhile, October Brent crude (LCOV5, -0.62%) settled 45 cents down at $48.74 on the London ICE Futures Exchange following a degree of price volatility.
Tyler Richey, co-editor of the 7:00’s Report said, “Investor focus remains on the global supply glut and production surplus, underscored by the headlines that [the Organization of Oil Exporting Countries] may reach a record level of output later this year as Iranian production is ramped up and exports resume. There is still a lot of momentum behind this selloff.”
Ritchey added, “Until we see the downtrend dating back to June …. decidedly broken, and the early signs of a bottom forming on the charts, we will remain bearish on West Texas Intermediate prices for the time being.”
A small glimmer on the horizon was however that NYMEX prices ended above the intraday low of $41.64 according to FactSet data.
Tyler Richey also mentioned that there are rumors doing the rounds of the planned bankruptcy of Samson Resources in a move that could be the forerunner of more gas and oil companies declaring bankruptcy. A trend of this nature would result in a decrease in oil production in the U.S.
Morgan Stanley said in a weekly report that they have, “concerns about crude oil fundamentals and prices in [the second half of 2015] and 2016.”
The good news for U.S. oil producers is however that they are expected to obtain approval to trade oil with Mexico; a change that market watchers are saying could be a milestone in loosening the four decade old ban on selling U.S. crude overseas. A move of this nature may assist in providing some support for oil prices.
MT4 Chart: Oil