November 2015 Monthly Average Crude Oil Price

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The monthly average U.S.-dollar price of West Texas Intermediate (WTI) crude oil retreated in November (-$3.83 or 8.3%), to $42.39 per barrel. The price decrease coincided with a stronger U.S. dollar, the lagged impacts of a 589,000 barrel-per-day (BPD) decrease in the amount of oil supplied/demanded in September (to 19.2 million BPD), and an advance in oil stocks. The monthly average price spread between Brent crude (the predominant grade used in Europe) and WTI narrowed by $0.33 in November, to $1.88 per barrel. 

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Commentary from Oilprice.com editor Evan Kelly: “Oil prices continue to flounder in the low $40s per barrel, amid no sign of an easing in global supplies.” As the graph below indicates, futures prices ended our data collection period at or sliding toward the bottom of the month-long range. “The latest data from the Energy Information Administration shows ongoing resilience in U.S. oil output,” Kelly continued. “For the month of September, U.S. oil production average 9.326 million barrels per day, declining by just 20,000 barrels per day from the month before. The contraction is much smaller than anticipated, leaving U.S. output down only around 300,000 barrels per day from a peak in April. But, with the rig count continuing to fall and oil prices staying depressed, a deeper contraction should be coming in the months ahead.” 

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Commentary from ASPO-USA’s Peak Oil Review editor Tom Whipple: “For November, oil prices are be down about [8]%. There seems to be general agreement among observers that prices are headed still lower. Moscow announced that it will not be sending a high-level official to the OPEC meeting thereby foreclosing on the hints that Russia and OPEC were about to come up with a deal to cut production and raise prices.

“The weekly U.S. report had crude inventories up by a million barrels and U.S. production holding steady at around 9.2 million b/d -- down about 400,000 BPD since last April. The usual factors keeping downward pressure on oil prices remain in place -- growing global inventories; a stronger dollar; a contracting Chinese economy; no sign that OPEC is about to reduce production; forecasts of a mild winter in the northern hemisphere; and the uncertainty as to what will emanate from the Paris climate conference that opens this week.  All these factors are raising fears that the $40 barrier soon will be broken and that prices will fall into the $20s.

“While it is generally agreed that oil prices will start rising by the end of next year or possibly in 2017, concerns are growing as to what will happen to the oil industry if prices fall into the $20s and nearly all oil production becomes uneconomical this winter. With 250,000 layoffs so far and capital spending down by $100 billion with more cuts projected for next year, discussions are increasing about the consolidations and other restructuring of the industry.  A wave of bankruptcies is expected soon among the smaller companies that so far have been able to hold on despite the declining prices.

“Some believe that the shakeout will be beneficial in the long-run for the U.S. oil industry in that those companies that survive will have become so efficient that they will be competitive with lower-cost foreign producers after prices rebound.”

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.