Another week has passed, with energy markets following the same trajectory: the price of WTI crude fell for the 10th time in 11 weeks. In the week ended December 12, WTI crude slumped another 8%. Given the great volatility in the market, we are still of the opinion that a good opportunity will present itself over the next few weeks, but we believe it is better to wait for prices to stabilize before actively recommending that our clients implement new transactions.
- The International Energy Agency (IEA) revised its world demand forecast downward, and this pushed the price of oil below $60 per barrel for the first time since July 2009. In its annual report, the IEA cut its demand forecast for all of 2015.
- The current situation is a catastrophe for many producing countries, in particular for Venezuela, whose currency reserves are disappearing at an alarming rate. On December 10, Venezuela's representative to OPEC publicly stated that the cartel's members should get together before their next planned meeting in June 2015. One sign of the country's problems is the fact that it must now pay 24% on its 10-year bonds denominated in U.S. Dollars. In comparison, the current rate on 10-year U.S. bonds is just over 2%.
- The drop in prices is being felt in drilling operations; the number of active drills has dropped sharply. Many of the U.S. oil majors have also cut investment expenditures, and it is becoming clear that declining oil prices will have an impact on U.S. oil output. Have a great week.
Emmanuel Tessier-Fleury