West Texas Intermediate (WTI) dropped to $38.51 on Monday, after diving to $37.75 earlier in the morning. That’s a 6.7% crash since Friday and the worst front-month price point since 2009. This marks the eighth straight week of losses for crude oil, the longest consecutive record since 1986.
But the oil price collapse is only the beginning of the story.
Major international energy companies have now dropped to their lowest level in nearly four years as concerns over possible economic collapse in China have spread to North American markets. An index of 40 oil explorers, drillers, and refiners collectively lost over $17.0 billion in a matter of hours, collectively falling by more than two percent on the New York Stock Exchange. (Source: Bloomberg, last accessed August 24, 2015.)
We’re talking about losses equal to the entire gross domestic product (GDP) of small countries.
Exxon Mobil Corporation’s (NYSE:XOM) year-to-date decline, for example, now stands at about 24%, which means the international giant might be on course for its worst year since 1981. (Source: Vancouver Sun, last accessed, August 24, 2015.)
What can you expect from the oil price forecast in 2015?
With surging global oil production, crude oversupply, rising oil stock levels, and slumping demand, the drop in all the major stock indices could not have happened at a worse time. According to some analysts, today’s massive loss by oil majors isn’t even about their market fundamentals, but more the alarming tremors coming from the Chinese stock market. (Source: CNBC, last accessed August 24, 2015.)
In a low price environment for virtually all global commodities, it’s hard to imagine where uplift for oil will come from. As economic collapse becomes a distinct possibility in 2015, the oil slump is fast becoming just another piece of our dysfunctional economic puzzle.
The oil price forecast in the near and medium-term is anyone’s guess. But given decreasing demand with the end of summer driving season, not to mention ongoing stock market volatility, it might be dropping well into the $20.00s.