Crude Seen Falling to $50 in 2015

refinery oil production
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By Grant Smith and Mark Shenk

(Bloomberg) — Crude oil prices are poised to fall below half where they were six months ago, before producers begin dealing with a global glut.

Brent, the global benchmark, will slide to as low as $50 a barrel in 2015, according to the median in a Bloomberg survey today of 13 analysts, down from the $115.71 a barrel high for the year on June 19. The grade has already collapsed 47 percent since then and needs to fall further before producers clear the current glut, said five out of six respondents who gave a reason.

Brent futures sank to a five-year low today, two weeks after the Organization of Petroleum Exporting Countries decided to maintain output even as the highest U.S. production in three decades swells a global surplus. The organization will stand by its decision even if prices fall to $40, United Arab Emirates Energy Minister Suhail Al-Mazrouei said yesterday.

“This won’t stop until oil producers are on their backs,” Bjarne Schieldrop, chief commodities analyst at SEB AB, Sweden’s fourth-biggest bank., said by phone from Oslo today. “There will be better demand in the second half, hopefully some demand effects from lower prices, and definitely softer growth in U.S. shale.”

Brent futures traded at $61.26 a barrel on the ICE Futures Europe exchange in London as of 5:08 p.m. local time.

Own Goal

Some respondents predicted the floor may be close to current levels. Drilling activity in the U.S. is showing some signs of a slowdown, which may intensify as financing becomes more difficult, according to Saxo Bank A/S in Copenhagen. Output in some OPEC members outside the Persian Gulf will suffer before U.S. shale drillers curb operations, consultant Petromatrix GmbH predicts.

“OPEC has scored an own-goal,” Olivier Jakob, Petromatrix’s managing director, said by e-mail. “Non-Gulf OPEC countries will participate against their will in the supply re- balancing of 2015. Venezuela will fall before the Bakken does,” he said, referring to the U.S. shale formation in North Dakota.

Copyright 2014 Bloomberg.