Oil drops $2 to five-year low on oversupply
By Jack Stubbs Reuters LONDON -- Brent crude oil fell more than $2 a barrel on Monday to a new five-year low on predictions that oversupply would keep building until next year after OPEC decided not to cut output. In a report dated Dec. 5, Morgan...
By Jack Stubbs
LONDON - Brent crude oil fell more than $2 a barrel on Monday to a new five-year low on predictions that oversupply would keep building until next year after OPEC decided not to cut output.
In a report dated Dec. 5, Morgan Stanley said oil prices could fall as low as $43 a barrel next year. The U.S. investment bank cut its average 2015 Brent base-case outlook by $28 to $70 per barrel, and by $14 to $88 a barrel for 2016.
“Without OPEC intervention, markets risk becoming unbalanced, with peak oversupply likely in the second quarter of 2015,” Morgan Stanley analyst Adam Longson said.
Brent for January was down $1.82 at $67.25 a barrel by 8 a.m., having fallen $2.30 to $66.77 - its lowest since October 2009.
U.S. crude <CLc1> was down $1.24 at $64.60 a barrel, after hitting a session low of $64.14. The U.S. contract, also known as West Texas Intermediate, touched $63.72 last week, its lowest since July 2009.
At a meeting last month, top oil exporter Saudi Arabia resisted calls from poorer members of the Organization of the Petroleum Exporting Countries to cut production, driving a further slide in prices, which have lost more than 40 percent since June.
Cartel member Kuwait said on Monday that oil prices were likely to remain around $65 a barrel for the next six to seven months.
“I think oil prices will remain at these levels ... until world economic recovery is clear or if there were any political crises or OPEC changed its production policy,” said Nizar al-Adsani, chief executive of Kuwait's state oil company.
In Libya, state oil company NOC said on Sunday the country was producing 800,000 barrels per day, though its El Sharara oilfield was closed because of a pipeline blockade.
The U.S. shale industry has yet to be hit by the slump in crude prices, Baker Hughes said in a report on Friday, reporting that three new U.S. oil-drilling rigs had been added in the last week.
“It was just a small increase, but nevertheless it was an increase despite the sharp price drop,” said Carsten Fritsch, senior oil and commodities analyst at Commerzbank in Frankfurt.
“Given continued oversupply and still no sign yet that U.S. oil production starts to show any reaction, perhaps prices will continue to head lower,” he added.