The surge in oil prices in the wake of the US inventory data yesterday proved extremely short-lived. Brent finds itself in free fall this morning and has hit a new 2¼-year low of $92.6 per barrel. For the first time since April 2013, the WTI oil price has dropped below the psychologically important $90 per barrel mark. And this despite the fact that – according to the US Department of Energy – US crude oil stocks bucked expectations and fell by 1.4 million barrels recently. Gasoline and distillate stocks likewise decreased significantly, though this was due to lower capacity utilization at US refineries, which are carrying out the usual seasonal maintenance work. This suggests that crude oil stocks will grow in the coming weeks, and may explain in part why yesterday’s price increase did not last long. We believe that a far more important reason for the ongoing downward trend is the absence of any supply response from OPEC. On the contrary, Saudi Arabia has once again noticeably lowered the price differentials for its oil types as compared to the international benchmarks for all its customers in November. In some cases, this puts them at their December 2008 levels, that is to say the level they were at during the 2008/09 economic crisis. Such measures give rise to doubts about OPEC’s longstanding strategy of striving above all for price stability. OPEC appears to be gearing up for a price war. We therefore do not expect prices to stabilize until this impression disappears and OPEC returns to coordinated production cuts.
