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Oil Price Reaches its Lowest Level since Twelve Years

Source: 1/19/2016, Location: Europe

The price of OPEC basket of thirteen crudes stood at 23.58 dollars a barrel on 18 January 2015. This is the first time since April 2004 that the Brent crude price has fallen below $30 a barrel. Oil prices have fallen by 70% in the past 15 months.

A continued fall in oil prices could force Russia to revise its 2016 budget, Prime Minister Dmitry Medvedev warns. Russia’s 2016 budget was made in October on the assumption of $50 a barrel for oil prices. The prices right now is about $30 per barrel, but many analysts say it could even drop below $20. Taxes from oil and gas generates about half the Russian government’s revenue.

Saudi oil minister Ali al-Naimi said on Sunday 17th January 2016 it would take "some time" to restore stability to the global oil market in the midst of a glut but he remained optimistic about the future.

Naimi's comments come at a time when OPEC member Iran is preparing to raise oil exports after international sanctions were lifted on Saturday 23rd January 2016. Brent LCOc1 plunged to $28.94 a barrel on Friday 15th January 2016, its lowest in 12 years, on the prospect of additional Iranian barrels.

"This is one of them. Market forces, as well as the cooperation among the producing nations, always lead to the restoration of stability. This, however, takes some time," he said. "I am optimistic about the future, the return of stability to the global oil markets, the improvement of prices and the cooperation among the major producing countries," he added.

Meanwhile, Iran is ready to increase its crude oil exports by 500,000 barrels a day, its deputy oil minister said on Sunday 17th January 2016. Such comments could put Iran on a collision course with Saudi Arabia and other Gulf members, who have been resisting cutting production to shore up prices.

The lifting of crippling sanctions imposed on Iran over its nuclear program may be opening a new era of closer political and business relations between Tehran and Moscow, but it also shows that it and the United States, its longtime nemesis, are capable of working together constructively.

For the past 18 months, oversupply has been the main factor responsible for dragging down prices by two-thirds, after Saudi Arabia led OPEC in a shift of its policy in November 2014 by deciding against cutting production to support prices.

For more details check this page: Oil and Gas Trends

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