The price of a barrel of oil dropped below US$40 for a time Friday, as the world’s global markets continue to slide.
North American index, West Texas Intermediate (WTI), dropped to a low of US$39.86 Friday, before rallying slightly to US$40.29 at its close, as news continued to flood global economies of a continued slowdown across the world’s emerging markets.
Europe’s benchmark, Brent Crude, also continued to tumble to a low of US$45.46 a barrel. It was the lowest price since March 2009 for both crude indexes.
The Problem With China
As the world’s developed nations continue to drag themselves back on their feet economically, the problem dragging the world in the other direction lays in the world’s emerging markets.
Most wrongly of all is China. The world’s second biggest economy continues to slow at an alarming rate, whilst its current output is the lowest since March 2009- the height of the global depression.
Further problems concern the accuracy of the data. Traditionally, data released from the autocratic nation is seen to been overstated and dressed to be overly optimistic, to the point market analysts in principle mark it down.
What concerns the world currently is the data coming out of China is already bad in its dressed up state, and as hard as the globe’s number crunchers work, no one seems to be able to get a definitive grip on the state of China, apart from ‘its not looking good’.
Some of the data we do know shoes that China’s stock markets have lost US$ 3.2 trillion in the last month alone, an amount larger than the entire stock market of France. Thats with the Chinese government desperately buying stock in a bid to prop it up.
Possibly one of the most accurate measurements analysts go off, is to analyse what China is importing to run its own economy. What the world does know is that China’s demand for crude oil in order to run its factories is near flatlining.
Adding that to the already growing oil glut caused by the underhand fight for global supremacy between OPEC and the US shale markets, results in oil prices that are on their longest loosing streak for almost 30 years- 1986 to be exact.
The worrying question of all for the global offshore oil and gas industry is- how much further can the price of a barrel go?