Oil prices have continued their year-long retreat as US Energy Secretary Rick Perry hailed a new era of American leadership in the production and exploration of power sources.
Greatly increased American oil and gas output is a key factor weighing on the price of crude, as are fears of a global recession and the side-effects of the Washington-Beijing trade war.
“Prominent downside risks”
One month ago, on September 30, Brent traded at $59.25 and WTI at $54.07, while three months in the past, on July 29, Brent was worth $77.34 and WTI changed hands at $56.87. A year ago, on October 29, 2018, Brent was trading at $77.34 and WTI was worth $67.04.
Economic fears are helping to depress oil prices. Earlier this month, the International Monetary Fund warned in its World Economic Outlook: “Global growth is forecast at 3 per cent for 2019, its lowest level since 2008-2009 and a 0.3 percentage point downgrade from the April 2019 World Economic Outlook. Growth is projected to pick up to 3.4 per cent in 2020 (a 0.2 percentage point downward revision compared with April)…[but given] a projected slowdown in China and the United States, and prominent downside risks, a much more subdued pace of global activity could well materialise.”
Perry is leaving the Energy Department later in the year. In his letter to Donald Trump, in which he praised the President for having “positively changed the course of this country”, he added: “American Presidents have talked about the importance of energy independence. Under your watch, it has finally been achieved.”
Output curbs to support prices
He went on: “Across the world, we are competing like we never have before. Not long ago, America was an importer of energy. Now, the US private sector is leading the world in energy production, exploration and exports.
“This historic success speaks to your leadership and willingness to go places where other leaders never thought possible. Today, when the world looks for energy, they can now think of America first.”But while the US benefits greatly from its new-found status as an energy superpower, other oil producers have taken action to support the price. Since December 2016, the 14-nation energy cartel, the Organisation of Petroleum Exporting Countries (OPEC), has joined forces with a supportive group of non-member oil producers, known as NOPEC, to reduce output in the hope of stopping the price slide. The current deal, which runs until March next year, seeks to cut output by 1.2 million barrels a day.
Saudi Arabia is the leading member of OPEC and Russia plays a similar role in NOPEC. Other OPEC members include the United Arab Emirates, Nigeria and Libya, while NOPEC takes in Mexico, Malaysia and Oman.