West Texas Intermediate, the main oil contract traded in New York, fell below its Friday low of $ 57 US and was trading at $ 55.07 US a barrel on Monday in late afternoon. It fell $ 2.74 today and is down 46 per cent on the year.
The current rout in oil prices began in September as markets realized that demand for oil was waning, even as U.S. shale producers were stepping up output. Then on Nov. 27, OPEC members voted to maintain their current levels of production at 30 million barrels a day, despite the apparent glut of oil.
The decision left North American producers defiant, saying they wouldn’t be driven out of the market by tactics from the oil cartel. But OPEC members have wondered aloud why they should make all the cuts.
“Oil producers can spend less to get the same or potentially even more in terms of production,” the bank said today in an emailed report. “While reductions in [capital spending] are coming faster than expected, it is unlikely to translate into less supply.”
On Monday, Calgary-based Western Energy Services Corp. said it’s planning a 2015 capital spending budget totalling $ 64 million, which would be down significantly from this year. The company had spent $ 77.5 million in the year to Sept. 30, but falling oil prices have slowed its spending in the fourth quarter.
Instead, the cutbacks oil producers are already making will lead to reduced supply and demand will grow in 2015, as the U.S. recovers its economic strength.
Many of the long-established shale wells will also see production taper off, Ignjatovic said.
Meanwhile, a Quebec body that consults with the public on environmental issues has recommended against allowing fracking for shale gas in the lower St. Lawrence area because of the environmental risks.
After an inquiry ordered by the Quebec environment minister, it concluded the risks to water quality outweigh any possible rewards.