US oil rigs count continue to fall for the second consecutive week to 652 on the week ending September 11, 2015.
Amidst a low oil price environment, and a looming credit line revision by major banks in the US, we can expect continued pressure on US shale oil companies. We could potentially see several more companies filing for bankruptcy protection.
While the US has overcome several major hurdles in supporting the Iran deal, hardliners in Iran are rallying against the deal.
Link: http://www.bloomberg.com/news/articles/2015-09-16/iran-nuke-feud-shifts-to-tehran-as-hardliners-push-to-sink-deal
Should the hardliners win, then that will throw a spanner in the works where the deal is concerned.
So where will oil be in the coming months?
I still see it in the sub US$50 in the immediate term.
Further support could come in the continued fall in US oil supply and projected decline in production. Production could take a hit in coming months due the following factors:
1) High depletion rate in wells coupled with slowdown in drilling activities (fall in rigs count) will put the brakes on production
2) Financial distress due to overwhelming debt among shale oil companies. Unable to fund further activities due to insufficient funding or bankruptcy
3) Low oil price will continue to discourage producers from expanding their capex. if fact, most have cut their capex for the next 12 months, and reduce their workforce
Despite the above, oil price is unlikely to return to more then US$80 per barrel in 2016 due to the likelihood of China entering into a recession. The next few months will provide indications whether China is heading towards that direction.
Taking all the above into consideration, I would say that oil could hover in the US$50 - US$60 per barrel towards year end.
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