In energy markets, U.S. crude oil fell 42 cents to $44.77 a barrel in electronic trading in New York. Brent crude, which is a benchmark for international oils, rose 8 cents to $48.06 a barrel in London.
Fuel prices have not retreated as sharply as crude. Gasoline futures are still up 1.2 percent for the day at $1.3769 a gallon. Diesel futures are up 1 percent to $1.5017 a gallon.
It could be until next year before the economic growth and rising demand for gasoline take center stage in the oil market. Oil prices have been stuck in a tight range below $50 a barrel in recent weeks as the global oversupply of crude, which has battered prices since last year, shows few signs of abating, Fox News reported.
Meanwhile, a $3 billion United Arab Emirates project that would boost the country’s production by 100,000 barrels a day is on hold until contractors offer cheaper terms, a UAE oil official said. And in Oman, the government has delayed $1.4 billion in contracts for special electric pumping, a critical technique for the sultanate’s low-pressure oil reserves, according to people familiar with the matter.
The delays demonstrate how a protracted period of sharply lower oil prices could have long-term effects on the production capacity of big Middle Eastern producers and reflect decisions being made across the oil industry as big projects are shelved to cut costs. According to Scotland-based energy consultancy Wood Mackenzie, oil companies have put over $200 billion spending on hold as crude oil prices hover around $50 a barrel, down from $114 a barrel in mid-2014, The Wall Street Journal reported.
But the delays also raise questions about the sustainability of the Organization of the Petroleum Exporting Countries’ strategy of pumping as much crude as possible during this period of low oil prices to maintain its share of the export market. In the past, OPEC often orchestrated production cuts that made oil scarcer and drove prices up.
This time, Saudi Arabia and Iraq are producing record levels, and Kuwait and the United Arab Emirates have oil output near historic highs. The glut of production comes as investment banks and energy companies predict oil prices of around $60 a barrel or less through 2016, which could eventually force changes at big state-owned oil firms that once seemed immune to price fluctuations.
For now, Middle East production shows no sign of abating. Kuwait’s oil minister said recently the country was on track to produce 4 million barrels a day in 2020, up from about 3 million a day currently. Saudi Arabia’s oil minister Ali al-Naimi said earlier this month the kingdom will maintain its planned oil investments.
And Iran is ramping up oil production and preparing for new investment if western sanctions are lifted next year as expected.
Several important projects in the Middle East are still under way. For example, in May, Abu Dhabi awarded a $334 million contract to a unit of China National Petroleum Corp, to help develop the 20,000 barrels-a-day Mender onshore oil field.
China, the world’s second-largest oil consumer, is currently importing only half of its requirement. Since January 2009, China’s oil imports have more than doubled, at a 16 percent compounded annual growth rate. As of December 2014, crude imports had reached 7.1 million barrels per day.
Looking ahead, China’s strategic petroleum reserve is likely to grow at an accelerated rate. China is close to accumulating 100 million barrels as part of the second phase of growing its reserve, news sources stated.
Associated Press sources also contributed to this report.
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