Output from US shale oil actually rose to more than 9.2MMbpd Oil has been tumbling and yesterday, it crashed to the latest lows for more than a decade. The first milestone saw international benchmark Brent crude fall below $35 for the first time since 2004 in mid-afternoon in London, while in the overnight trading sessions in the US and Asia, it eventually hit a near 12-year nadir just above $32.
Traders have bucked the historic trend of buying into oil futures when Middle Eastern tensions rise because there is now a broad consensus the unrest is as likely to be a harbinger of greater oil supply, rather than less. Saudi Arabia and Iran are key members of the powerful Opec cartel and the diplomatic breakdown will surely prevent any harmony on policy to end the global oil glut.
Adding to the bearish picture was the latest set of data from the US energy watchdog. Although overall crude oil stockpiles in the country fell last week, Reuters notes the report revealed reserves of derivative distillate products – in some respects a better gauge of supply relative to demand – soared by 16 million barrels.
Worse, the BBC adds that output from US shale oil rigs actually rose to more than 9.2 million barrels a day. The turf war being fought by the world's oil giants was supposed to have crushed expensive-to-produce shale and thus rebalanced the market, but extractors are proving far more resilient to loss-inducing low prices than anyone had thought possible.
So how low will oil go? Paul Stevens, professor emeritus at the University of Dundee and a Middle East specialist, predicted in a BBC interview that shale production would not slow down meaningfully until prices fall below $25 a barrel - and perhaps even as low as $20. This echoes the forecasts of analysts including Goldman Sachs late last year.
Again Capital founding partner John Kilduff, meanwhile, told CNBC that prices could even break below $18 a barrel if Iranian sanctions are lifted as expected in the coming months and the country ramps up exports. A price war is getting underway already in Europe as Saudi Arabia discounts to shore up market share.