Even lower prices await the oil industry

The market is at last adjusting to the fundamentals of weak demand growth and burgeoning supply

Is the 40% drop in oil prices since June a correction or a crash? Anyone in the oil industry hoping the slump in the second half of 2014 will be reversed soon should probably think again. Even lower prices await. A return to $80-a-barrel oil, let alone $100, looks a long way off. Rising supply and weak demand growth made the recent decline inevitable. The supply gains continue to be startling. US output in mid-November was 1 million barrels a day (b/d) higher than at the same point in 2013. Thanks to the Eagle Ford and Permian, Texas on its own added 660,000 b/d to supply by the end of September. In a global context, that means that in just three quarters Texas by itself accounted almost ent