The U.S oil price plunges, reaching its lowest value in the past 6 years. Meanwhile, the dollar is maintaining an elevated price, its highest in the last 12 years, while the euro is still at a low point.
On Monday, March 16, oil prices fell with almost 3 percent, reaching a six-year low while oil storage space is getting scarce worldwide. The price for U.S. crude oil fell to $43.57 in early tradings, the lowest value since March 2009, but at around 0335 GMT it managed to gain some power, reaching $44.34. This is still half a dollar less since its most recent settlement. Brent set its selling price at $54.32 a barrel, seeing a 35 cents decrease.
China used this low price situation to strengthen its strategic petroleum reserves (SPR) thus bringing its import rate to a new high despite weak economic demand. But according to analysts, the new oil shipment will be used only later this year, thus fulfilling near-term import needs.
Wendy Yong, analyst at energy consultancy FGE considers that:
“While the low crude oil prices are expected to incentivize crude stockbuild (in China), stockpiling activities at the SPRs this year will remain constrained by available spare capacity.”
The International Energy Agency stated that the United States might not have enough empty tanks for additional oil storage. It also stated that in February, worldwide supply was at about 1.3 million barrels per day. The situation will be stretched even more if the oil wells will be opened once more after initial closure due to rough winter conditions.
According to Goldman Sachs a decreasing rig count will result in just a slight drop in production intensity during this year’s Q2.
Oil price was also influenced by the strong U.S. dollar which reached its peak value in the last 12 years.
The Federal Reserve’s policy-setting committee will convene this week, probably looking to modify monetary policy as soon as June.
A more powerful greenback affects trading with other countries as products and services set in dollars become more expensive for retailers operating with other currencies.
The euro, on the other hand, sees another decrease in value, reaching an equivalent of $1.0457 in the Asia session. This is the lowest reported value since January 2003. In comparison to summer 2014, euro saw a 25 percent decrease in value.
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