Global crude prices, which have been witnessing a free fall since the past three months, breached the $50 per barrel mark for the first time since 2009 and reached $49.81 per barrel during trading before ending at $51.10 per barrel by the time the markets closed.
The moot question which was globally being asked was whether crude prices will reach $40 per barrel at some point of the timeIJ Analysts though are of the opinion that any particular figure is irrelevant as during the ongoing week, crude oil prices are likely to go in for a free fall this week, and in such a scenario it is difficult to put a finger on what levels exactly they may touch.
Industry sources also pointed out that with OPEC not seemingly in a mood to cut down on its current supply of 30 million barrels per day, the sharp fall in crude prices is likely to continue till the end of next week, before bottoming out. “The crude prices will continue to fall for some time, may be for another week or so. But may bottom out soon,” said Debashish Mishra, Senior Director, Deloitte Touche Tohmatsu.
Industry sources said that the fate of crude prices may also depend on what stand OPEC takes in future, though as of now the organisation does not seem to be in a mood to budge from its present stand of supplying 30 million barrels a day. Another theory initially being floated was that Saudi Arabia, which is the largest exporter of crude, is deliberately not allowing OPEC to cut supplies, as it wants crude prices to fall to such levels, even to as low as $40 per barrel, that US’ shale oil prices become non-competitive globally.
Government sources though said that this line may prove counter-productive for Saudi Arabia as it can’t run so close to US after a point of time. Meanwhile even reports emanating from top foreign news agencies were of the opinion that with OPEC not showing signs of cutting down over-production of crude, it seems possible that there could be further decline in crude prices to $40 in the coming weeks, especially as demands are not picking up.
Another report said that plunging oil prices have negatively affected American companies in the short run. However at the same time, increased US production will mean that the country is moving towards becoming a global leader in oil production. International analysts were of the opinion that falling prices have empowered US and at the same time weakened OPEC and Russia.