Oil Prices Drop by Four Percent to Lowest Level in Five Years

On Monday, December 8, oil prices fell by four percent, reaching their lowest level in five years, while Kuwait predicted that the price of this commodity would remain stable at around $65 in the next six to seven months. According to Reuters, Brent crude oil for January delivery decreased by $2.88 to $66.19, indicating a four percent drop. This marks the third largest drop in oil prices in a single day this year and the lowest price since October 2009. U.S. crude oil also fell by $2.79 to $63.05, the lowest price since July 2009. Following a forecast from Morgan Stanley predicting further declines in oil prices, the downward trend continued on Monday. In a report dated December 5, Morgan Stanley stated that oil prices could drop to $43 per barrel by next year. Meanwhile, U.S. investment bank forecasts a $14 drop in the base price of Brent oil to about $70 per barrel for 2015 and $88 per barrel for 2016. Adam Longson, an analyst at Morgan Stanley, stated, "Without action from OPEC member countries, the market will become unbalanced due to maximum oversupply in the second quarter of 2015." Tarek Zahir, an expert from Taiche Capital investment consulting, said, "When oil prices drop, the decrease is usually greater than expected. I think the trend is towards further decline. Everyone is trying to reach the bottom price." Saudi Arabia, as the largest oil exporter in OPEC, opposed requests from poorer member countries to cut production at the November meeting. Oil prices have dropped by 40 percent since June of this year. Kuwait, another OPEC member, stated on Monday that oil prices are likely to remain around $65 per barrel in the next six months. The Libyan state oil company announced on Sunday that despite the shutdown of the Sharara oil field due to a pipeline blockage, the country is producing 800,000 barrels of oil daily. Baker Hughes reported on Friday that three new drilling areas began operations last week in the U.S. and stated that the U.S. shale oil industry has not yet been affected by the global oil price drop. Production of this type of oil remains high, and forecasts made on Monday indicate that production in three major U.S. shale oil areas will exceed 100,000 barrels in January.