Global economic and geopolitical factors are being blamed for the latest slide in oil prices which has seen West Texas Intermediate (WTI) crude–the closest in price to the light sweet crudes produced in T&T–drop 7.7 per cent in international markets Monday and another 3.6 per cent yesterday to close at US$50.64 a barrel.
The current WTI price is down 15 percent from the high for the year set on June 10. However, it is still above the revised benchmark oil price of US$45 per barrel and a revised T&T netback wellhead gas price of US$2.25 per mmbtu on which the national budget is pegged.
WTI has lost almost 10 per cent since Thursday's close on global markets and has lost almost 20 percent from a high above US$62 just a month ago. It had been sitting near US$60 a barrel for a few months after bottoming at US$43 in March.
Analysts say a range of global economic and geopolitical factors are responsible for oil's downward slide and they are forecasting falling demand for crude with supplies high and expected to rise. Factors affecting the oil price are:
�2 The Greek financial crisis could slow economic activity in Europe, which would reduce demand for gasoline and diesel.
�2 China's oil imports have already slipped this year and a plummeting Chinese stock market could mean even weaker demand in the world's second largest oil consumer.
�2 Oil production in Opec, driven by strong production from Saudi Arabia and Iraq, is helping to keep the world's supplies high.
Opec's June production rose for the fourth month in a row, to 31.3 million barrels per day–1.3 million barrels per day more than the cartel's official target and the highest level since August 2012.
�2 Iran is eager to begin exporting oil that has been held back by sanctions, and talks between the US and Iran that could lift those sanctions appear to be progressing.
�2 US oil production remained strong even after drillers slowed their activity in the face of low oil prices–and now some drillers are ramping up production again.
After hitting a six-year low of US$43.46 in mid-March, oil rose to nearly US$60 in late April as refiners processed enormous amounts of crude.
Oil then remained stable until the middle of last week.
In January, in response to falling oil prices, Prime Minister Kamla Persad-Bissessar announced plans to reduce expenditure and set the new prices on which the national budget are pegged.
With lower oil prices, the expectation was that the country would receive significantly lower levels of revenue than originally estimated when the budget was announced by Finance Minister Larry Howai in September 2014.
