Dubai: Crude oil prices may slide again to test a new low of $60 (Dh220.20) per barrel levels in the middle of next year on expectations before rising in the early part of the year as a likely removal of curbs on exports by the United States may add supplies in the world market.

United States, the second biggest oil producer after Saudi Arabia, produced 9 million barrels per day recently, its highest level in 29 years, as against Saudi’s output of 9.6 million barrels per day. According to the International Energy Agency, the US will become the world’s largest oil producer by about 2020.

Companies such as ConocoPhillips, the largest US independent oil and gas Company, have been urging the government to remove the 1970-era export ban, which was put in place when US oil production was falling. Brent crude, which has fallen 25 per cent since the start of the year, traded at $78 per barrel, its lowest level in four years.

“Post the winter by March April, we think that prices will slide again and we could see $60 per barrel by the middle of next year. We see this level as the low for 2015. This dip to $60 will be driven by oversupply from the United States,” said Arjuna Mahendran, chief investment officer at Emirates NBD.

“At the moment America is not exporting oil because of export restrictions. But those restrictions could be relaxed by the first quarter of next year, and when that oil will start hitting the global markets that is going to drive the next leg down,” said Mahendran.

Adding to supply could be the potential for rising supplies from Kurdistan and Iran, the latter if an agreement with regard to the current nuclear negotiations come to a successful conclusion, said Ole S Hansen, head of commodity strategy, Saxo Bank.

Before the dip, Brent crude may test $80-90 per barrel in the first quarter of 2015 due to rising winter demand from the United States.

“The near-term outlook, barring any new geopolitical worries and supply disruption, could see the price of oil settle into a $80-90 range,” said Hansen.

Opec meeting

Analysts feel that 12-nation Organization of the Petroleum Exporting Countries (Opec), which is responsible for 40 per cent of the global supply, may cut production to prop up prices, and avoid any adverse impact of lower prices getting transmitted to the real economy.

“The next Opec meeting is quite significant. Market expects Opec to slash productions by at least few million barrels. The recent Opec report did mention that there will be a decline in oil demand by over 1 million barrels a day,” said Pradeep Unni, senior relationship manager at Richcomm Global Services in Dubai.

The has been divided on whether to reduce output and prevent further falls. Venezuela and Ecuador have called publicly for a cut, while Iran has hinted at a need to reduce output as oil producing countries see their incomes slide.

But Saudi Arabia, Opec’s de facto leader and the world’s top producer, has been resisting calls for an output reduction, moving instead to slash prices on crude exports to maintain market share.

Opec pumps about just under 31 million barrels per day, around one million more than its ceiling. Opec members are due to meet in Vienna on November 27.

Impact

“The Gulf economies such as Kuwait, UAE and Saudi Arabia are the countries which can easiest withstand a prolonged reduction in oil prices. A major shift like the one witnessed these past six months will result in budgets being cut or maintained by using reserves,” said Saxo Bank’s Hansen.

Global oil prices tumbled to four-year lows below $78 per barrel, threatening — if current levels are sustained for a long period — to push the state budgets of some of the six members of the Gulf Cooperation Council into deficit after several years of big surpluses.

The IMF has estimated Saudi Arabia will need an average oil price of $90.70 a barrel in 2015 to balance its budget; the UAE would face a level of $73.30, Kuwait $53.30 and Qatar $77.60. Oman and Bahrain need much higher budget break-even prices.

“For every $10 fall in oil prices will result in 0.3-0.4 per cent reduction in GDP. That will impact growth expectations,” Mahendran from Emirates NBD said.