As shown by Wednesday data, oil and petroleum products in the US are not reduced and kept at record values. This makes it very possible for a further decline in prices, said the director of analysis of world commodity markets department of Citigroup – Edward Morse, speaking at a conference on oil and gas in Calgary (Canada).
According to Morse, today much of the responsibility for the collapse of the market stays on the US oil shale industry, which from 2011 to 2015 increased its production by about 4 million barrels per day. In addition, the development of oil sand deposits has made Canada a major oil power in the world. At the same time, OPEC production for this period has not changed much.
Therefore, the responsibility for the balance of the oil market should be on the countries causing the situation of oversupply, and not on Saudi Arabia, said Morse. A similar view was expressed by a Societe Generale (PA: SOGN) analyst, Michael Wittner.
The oil market has gone through a paradigm shift. During the commodity super cycle, which began over 10 years ago, the offer could not keep pace with demand, which was stimulated by the rapid rise of emerging economies. Then it was thought that the prices of natural resources, be it oil, natural gas or other products, should be increased based on depletion of resources and the rising costs of their production. Morse called it a "Malthusian myth about the lack of resources."
Now, thanks in part to new technologies, there is an oversupply, and demand is low due to the slow growth of the world economy and a more efficient use of energy.
According to Citigroup, the efficiency of drilling rose 15%, while capital expenditures decreased by 30% and in 2016 it will decrease by another 5-10%.
Another factor of pressure on oil prices is the return of Iran in oil market after the lifting of sanctions.
It is unlikely that the current price incorporated these additional barrels, since no one knows for sure how much oil Iran can offer to the market. Some say that this is the approximate volume of 500 thousand barrels per day, though it depends on infrastructure and export opportunities.
In addition, Russia has set a record production. During one year it has produced more than 534 million tons, which is 1.4% more than the previous year. "I do not know anyone who predicted that production in Russia will increase in 2015, not to mention the increase to record levels," - says Edward Morse.
"We now face the threat of oil at $ 20, not $ 40", - summed up the expert.