Down, down, down the slippery slope for oil. No wonder Scott Morrison is invisible. Every morning this year so far he awakens to find the budget down a bill or so as commodity prices, led by oil, continue to slide. And overnight we saw more pain. BP announced a new round of job cuts (4000 to go around the world), and Brazilian giant Petrobras is slashing billions of dollars in spending, and experts are forecasting that dozens of oil and gas groups will go bust this year if prices don’t recover. Oil slipped under US$30 a barrel in New York trading for the first time since 2003 to trigger another round of fear and loathing. It’s real back-to-the-future stuff and there is just no sign of any easing in the sell-off.

To make matters worse for local investors in Australia, iron ore prices fell for a fifth straight day, and prices for zinc, lead, tin and nickel all slumped to new multi-year lows. Even gold, which had stood out with a 2.5% rise so far in 2016, gave up nearly half of that with a 1% slide in New York. Oil touched a near 13-year low of US$29.93 a barrel in afternoon trading in the US before bouncing back above the US$30 level. Oil is down close to 18% since the start of the year (it was near 20% at one stage). And none of the “experts” saw it coming. Wall Street rose overnight Tuesday — dead cat bounce, and no help to the 2016-17 budget (which will have to be an election special). — Glenn Dyer

Oil price rise looms — in 2017? The key US government energy forecaster, the Energy Information Administration (EIA), reckons American oil prices will remain well under US$50 a barrel this year and next. In its first monthly short-term energy outlook of the year released overnight Tuesday, the EIA cut its 2016 forecast for US oil prices to US$38.54 a barrel, down from its previous forecast of US$50.89 a barrel. For Brent, the global benchmark, the EIA expects prices to average US$40.15 a barrel this year, down from its previous forecast of US$55.78 a barrel. Those are cuts of 30% and more.

Next year, the EIA expects prices to average US$47 and Brent to average US$50, so a rise in 2017. That was the EIA’s first forecast for 2017 prices. Those estimates are a bit higher than market levels at the moment, so small increases are pencilled in over the rest of this year and next, but they will not save many oil companies from further pain. The second part of the forecast was the estimated 7% slide in US oil output this year. That will be the first annual decline since 2008. But that would still leave US output more than 50% higher than five years ago. — Glenn Dyer

China is still the key. Chinese authorities yesterday whacked currency speculators trying to profit from an imbalance between the prices of the country’s currency inside China and offshore by attacking them in Hong Kong. In only two years they squeezed the market so hard that short-term interest rates popped to more than 66% (such was the shortage of Chinese currency needed by speculators) and forced the two prices of the currency back into sync. It was a brutal display of the power the Chinese central bank and other monetary authorities have to control markets. Analysts estimate that more than US$200 billion has been spent defending the currency by the central bank in the past few months. So serious money.

It was helped by another steady rate setting by the authorities for the mainland value for the currency. It has been the combination of a steady fall in the value of the currency and clumsy regulation of the stock market, on top of panicked selling by local investors (and many foreigners) that have driven much of the instability in 2016 so far. Later today another test with China’s December and 2015 trade figures. Weak import and export data will renew concerns about the health of the economy and demand for commodities, so strap yourself in — and watch the oil price, it is still the canary of choice and it will be squarking for a while yet. — Glenn Dyer

Peter Fray

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Peter Fray
Editor-in-chief of Crikey