Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Crude futures fall sharply, amid dwindling production forecasts for 2016

Published 09/14/2015, 02:19 PM
Updated 09/14/2015, 02:33 PM
WTI crude remained below $45 a barrel on Monday, while brent fell below $48

WTI crude remained below $45 a barrel on Monday, while brent fell below $48

Investing.com -- Crude futures fell sharply on Monday extending their severe downturn in recent months, as investors continued to digest market-moving comments from the International Energy Agency late last week on dwindling U.S. production.

On the New York Mercantile Exchange, WTI crude for October delivery wavered between $43.60 and $44.97 a barrel, before closing at $44.07, down 0.56 or 1.19% on the session. Trading remained volatile, as U.S. crude futures closed by more than 1% in either a positive or negative direction for the sixth consecutive session. Texas Long Sweet futures are still up by more than 5% since touching down to six and a half year lows earlier last month.

The losses, however, were not as sharp as the sell-off on international energy markets during Monday's session. On the Intercontinental Exchange (ICE), brent crude for October delivery traded in a broad range between $47.30 and $49.27, before settling at $47.41, down 1.63 or 3.32% on the day. The spread between the international and U.S. domestic benchmarks for crude stood at $3.34, below Friday's level of $3.48 at the close of trading.

On Friday, the IEA, a Paris-based agency, downgraded its forecast for U.S. production next year, citing the wide-ranging impact of Saudi Arabia's strategic policy aimed at undercutting shale driller in the U.S. In 2016, the IEA predicts that U.S. shale production will fall by 400,000 barrels per day, significantly below OPEC estimates of a 50,000 bpd increase. The IEA is regarded by many experts in the industry as one of the world's foremost providers of statistics and analysis on global energy.

Crude futures are down by nearly 60% since peaking above $100 a barrel in the summer of 2014. Last November, OPEC roiled global energy markets with its decision to keep its production ceiling above 30 million barrels per day in an effort to defend its market share. In addition, the IEA forecasts that global crude output will decline by a half million barrels per day next year, four-fifths of which will be concentrated among U.S. shale producers.

"US oil production is likely to bear the brunt of an oil price decline that has already wiped half the value off," the IEA said in its monthly report.

Last week, the U.S. Energy Information Administration (EIA) said crude output nationwide fell to 9.135 million bpd for the week ending on Sept. 4, marking the sixth consecutive week of declines. In early-June, crude production in the U.S. peaked above 9.6 million barrels per day, its highest on record in more than 40 years.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, gained more than 0.10% on Monday to an intraday high of 95.62, before falling back to 95.54 in U.S. afternoon trading. Dollar-denominated commodities such as crude become more expensive for foreign purchasers when the dollar appreciates.

Investors are hesitant to make any major trades ahead of the Federal Open Market Committee's two-day monetary policy meeting this week. On Thursday, at the completion of the meeting, the Federal Reserve could raise its benchmark interest rate for the first time in nearly a decade.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.