Oil Prices Up Slightly In The Asian Session

Crude oil continued to recover adding 41 cents to trade at 82.48 but remains well below its average trading range as production and supply remain elevated while global growth and implied demand weaken. Brent oil added 12 cents as the weaker US dollar helped give dollar denominated commodities a leg up. Brent like crude remains well under its trading level priced today at 86.33. The drop in oil prices especially for the US is like a stimulus injection the price of gasoline at the pump continues to decline and the cost of production and manufacturing ease with lower energy prices.

Wall Street rallied on Friday, softening a fourth week of losses, as investors bet on further stimulus from central banks and corporations including General Electric and Morgan Stanley reported profits that topped expectations. Asian equities enjoyed a broad-based rally on Monday, tracking a strong U.S. lead, with investor attention focused on developments in China. A possible recession in Europe, a floundering economy in Japan, a slowdown in China and the Ebola virus outbreak have conspired to rattle investors, triggering a level of volatility in global markets sending energy prices to new lows.

The dollar weakened for a second consecutive week for the first time since June as traders pushed out expectations for U.S. interest-rate increases to the end of next year with global economic growth faltering. Global oil prices rose slightly at the end of last week, recovering from multi-year lows on bargain hunting. During the session Brent crude hit 4-year lows. Brent crude rose by 34c to $86.16 a barrel while the US Nymex crude price rose by 5c to $82.75 a barrel. Over the week Brent fell by $4.05 or 4.5 per cent while Nymex crude fell by $3.07 or 3.6 per cent.

The downward spiraling oil price has led to growing tensions between the powerful Organization of the Petroleum Exporting Countries oil cartel and the US shale industry, but analysts suggest prices need to fall even further to hurt American producers. Many OPEC members, led by Saudi Arabia, refuse to curtail production for fear of losing market share to the growing US shale liquids industry. There is a diverse range of breakeven prices across the US shale industry, even if fringe production output is cut; productivity gains could offset any price support.

International Energy Agency executive director Maria van der Hoeven estimated 98 per cent of oil and energy produced in the US had a breakeven price of less than $80 a barrel, and 82 per cent has a breakeven price of $60 or lower. The International Energy Agency last week cut its forecasts for demand growth for the third month in a row. For this year, it expects demand to rise 700,000 barrels per day to 92.4 million, which is 200,000 fewer than previously forecast.