Crude oil prices remained at levels not seen since early 2009 on Friday as output in the Middle East continued to rise despite an already huge global glut, with analysts saying the price outlook for the rest of the year and into 2016 remained weak.
Brent crude futures were down 29 cents at $39.44 a barrel at 0551 GMT, a touch above a near-seven-year low hit earlier in the session at $39.38 a barrel.
US crude futures were at $36.52 per barrel, down 24 cents and just above Thursday’s bottom of $36.38 – the benchmark’s lowest mark since February 2009.
“The next quarter is going to be particularly tough as we go from a high-demand to a low-demand quarter,” said Richard Gorry, director of consultancy JBC Energy Asia.
“Can you rule out $20 per barrel? No, you can’t,” he said, although adding that prices would not likely fall that far.
Gorry said he expected a slow rebalancing of the market towards the end of next year, with production remaining stubbornly high despite low benchmark prices.
“A lot of producers are trying to maintain positive cash-flows and that means maximising output, and Iranian barrels are also coming back to the market,” he said.
The price rout is a result of a huge overhang in production that is fast filling onshore storage sites, which some analysts expect to run out in early 2016.
ANZ bank said on Friday that “crude oil markets will remain subdued in 2016, though prospects for a recovery look better in the second half of the year.”
Jefferies bank said that an “inventory overhang is likely to expand significantly through the first half of 2016 and will likely suppress oil prices in the near-term.”
Soaring output from OPEC member Iraq has been a large contributor to that overhang, with production there doubling over the past decade to around 4.3 million barrels per day, more than enough to meet all of India’s daily demand.
OPEC as a whole pumped more oil in November than in any month since 2008 despite forecasting little demand growth for crude next year in a bid to defend market share.
The cartel’s strategy to safeguard market share by pumping at record levels might be working.
US shale oil production, the main driver of non-OPEC supply growth, is expected to fall for a ninth consecutive month in January, according to a forecast on Monday from the US Energy Information Administration.