Oil

Oil: BT reports that even at US$50, oil price won’t hurt most production, not until at least until another US$10 drop. At current prices, only 150,000 barrels a day would be uneconomical to produce, at US$40, this would rise to 1.5m barrels a day. Energy consultant JBC energy sees the same, seeking another US$10-20 price fall before deliberate production cuts are made. Nevertheless, the weak price will most likely dent production growth. US oil output is expected to slow to a total of 1.3m bbls/day over 2015-16. The original target was a total of 1.4m bbls/day by 2016. That said, Iraq and Russia have continued to ramp up production while the Saudis are still maintaining market share. There are also factors supporting oil price. The steep fall over the past few days have resulted in a wide enough contango, where traders have incentive to store oil and sell at later date as future prices are higher than current ones, by a margin more than enough to offset storage costs. Continued disruptions in Libya’s oil production would also provide further relief to oil market.