Due to technicals linked to the delivery date of tomorrow it was only the May future price falling under $15, other contracts are not falling at the same pace. But oil is facing both a supply surge and a demand crash. Moreover, the oil wars have contributed to a further collapse. Recently, the reduction agreement of almost 9,7 mb/d is a first step towards a bottoming-out process. However, given almost 82% storage capacity and further inventory build-up in e.g. tankers, the supply-demand imbalance is taking a longer time to adjust. With that further weakness is likely before a bottom is found.
There are disruptive effects given the magnitude and speed of the price collapse. Producers will struggle and the US high yield market is quite vulnerable to that development. On the positive side consumers are supported and central banks can pursue their emergency measures for much longer without the faintest hint of inflation.
Gunther Westen, Head of Asset Allocation and Fund Management
It is quite likely that there may be further production cuts in order to stem the slide but OPEC has lost its power in that bargain poker. For US shale it will have a severe impact as the average break-even price is more in the mid 40ies.
