Tags: Yergin | oil | prices | economic

IHS' Yergin: 'We Have Entered a New Era' of Lower Oil Prices

By    |   Monday, 27 October 2014 10:54 AM

U.S. oil prices hit a two-year low Monday, and oil analyst Daniel Yergin, vice chairman of IHS, says low prices could last for a long time.

December West Texas Intermediate crude futures traded at $78.22 a barrel Monday on the Nymex.

"We have entered a new era in world oil," Yergin tells CNBC. "A decade ago, world oil was defined by Chinese economic growth and the price went up. Right now, this new era is defined by this incredible surge in U.S. oil production."

U.S. production has soared 80 percent in the past six years to a level higher than that for 11 of 12 OPEC countries, he notes. U.S. output stands at its highest level since 1985.

"That's happened, combined with what the head of the IMF [International Monetary Fund' has called the 'new mediocre' in the world economy," Yergin explains. "Suddenly, this sense is that things are weaker." The sluggish economic growth lessens demand for oil.

"Then out of the blue, this failed state called Libya, which was producing almost no oil, suddenly puts 1 million barrels of oil into the market [daily]," he adds.

"That's the brew that gave us these new prices. But the dominant thing is this growth in U.S. supply," Yergin argues.

Goldman Sachs analysts apparently agree with Yergin. They say that West Texas Intermediate crude may drop to $70 in the second quarter of 2015, according to Reuters.

Rising output and sluggish demand will fuel the move, the analysts say. The eurozone economy grew only 0.1 percent quarter-on-quarter in the second quarter, while Japan's economy shrank at a 7.1 percent annual rate.

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U.S. oil prices hit a two-year low Monday, and oil analyst Daniel Yergin, vice chairman of IHS, says low prices could last for a long time.
Yergin, oil, prices, economic
271
2014-54-27
Monday, 27 October 2014 10:54 AM
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