(MENAFN- ProactiveInvestors)
Mixed signs of economic growth in the US and in China confused the market last week but growing geopolitical concerns added to the ongoing uncertainty and volatility of the oil price.
The demise of the Chinese economy has weighed on the oil price all year and the economic data this month brought little reprieve.
On Friday U.S. crude closed at US$45.54 a barrel. For 2015 this is 22% down and from 12 months ago - 46% lower.
Industrial and manufacturing data was lower than expected with industrial profits falling to its lowest in four years. China has become one of the world’s biggest commodities consumers and further decline in economic activity will not sit well for oil demand.
The country’s official purchasing managers index ticked up slightly last month.
While the global oil supply continues to grow American oil production continues to decline now standing at 9.1 mln barrels a day.
Some expensive production has been taken off the market but if the oil price goes up again analysts believe some production could come back online.
The investment bank Commerzbank said in a research note this week that “US production is at its lowest level since the end of November 2014.”
The bank noted how other oil producing countries showed little willingness to rein in production.
Russia’s oil production is on the increase rising to above 10mln barrels a day according to government data released this week.
This is the highest rise since the fall of the Soviet Union.
Many OPEC ministers have had talks with the Russians over the past year about the global oversupply and while Russia was supportive of the situation it has failed to take action to cut production.
The low oil price has already hampered the Russian economy and helped push the country into a recession.
Other negative factors include the fallout from Western sanctions and a weakening currency.
The World Bank has not been optimistic about Russia’s future claiming it expects to wipe 3.8% off the Russian economy this year.
Russia’s finance minister Anton Siluanov said that he does not expect oil prices to recover as quickly as after the 2008-2009 financial crisis.
He expects to see oil averaging at US$50 a barrel in 2016 and US$52 in 2017.
The geopolitical situation in Syria worries the market and threatens the energy rich Middle East.
Analysts say the risk factor is now built into the price as Russian forces took a stronger stand launching air strikes midweek and Iranian troops are reported to be on the ground in Syria.
Fears that the civil war becomes more global and drags in international powers are high on the agenda.
The woes of the oil industry appear to be here to stay as “lower for longer’ becomes the new norm.
The outgoing president of the SPE Helge Hove Haldorsen talked about the need now for the industry to collaborate and become comfortable and “fit at fifty” dollars a barrel.
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