Oil prices could fall to the mid-$50s before cold weather or OPEC action stem the steepest slide in crude in 15 years, analysts said.
Reuters reported that easing supply concerns and growing inventories have cut U.S. oil prices from a record high $78.40 per barrel in mid-July to around $60 a barrel today, and fundamentals and technical data suggest a further drop.
“I think the fundamental picture has not changed and that inventory, growth and risk fundamentals look bearish through the shoulder period” between summer and winter, said Jason Schenker, economist at Wachovia Corp. in Charlotte, North Carolina.
The fastest drop in prices since the first Gulf War in 1991 is ringing alarm bells within OPEC, raising expectations the producer group will cut output to support prices.
U.S. crude briefly fell to $59.52 a barrel on Monday. Analysts now say an assault on technical trading support at $58 could portend a drop to around $55 a barrel.
“Oil prices are at a critical inflection point that could see WTI drop back into the $50s,” Citigroup Global Markets said in a research note.
Crude hit record highs as the standoff between Iran and the West over Tehran’s nuclear program stoked fears of a supply disruption from the fourth largest oil exporter. As the concerns eased, U.S. distillate stocks levels reached seven-year highs and pushed down prices.
OPEC, which controls 40% of the global oil exports, decided to leave production unchanged when it met earlier this month. Analysts say a cut may be coming if the fall continues, and Iran has said it does not want prices under $60.
“I think mid- to low-$50s, in the $52 area, you’ll see (OPEC) get pretty nervous,” said John Gretzinger of FCStone.