Forecast Brent crude oil prices average $40/b in 2016 and $50/b in 2017. Forecast West Texas Intermediate (WTI) crude oil prices average $2/b lower than Brent in 2016 and $3/b lower in 2017. However, the current values of futures and options contracts continue to suggest high uncertainty in the price outlook.

The slowdown has been rapid. As recently as a year ago, US manufacturing production was growing at an annual rate of 4.5 per cent, says Chad Moutray, chief economist for the National Association of Manufacturers. By November that had slowed to 0.9 per cent and this year Mr Moutray expects production to grow just 1.4 per cent.

Companies like BP, which said Tuesday it is cutting 4,000 jobs, are slimming down to cope with the slump in oil, whose price has plummeted to its lowest level in 12 years and is not expected to recover significantly for months, possibly years. California-based Chevron said last fall that it would eliminate 7,000 jobs, while rival Shell announced 6,500 layoffs.

Crude oil production in February from seven major US shale plays is expected to fall 116,000 b/d to 4.83 million b/d. Production from the Eagle Ford is seen dropping 72,000 b/d during the month to 1.15 million b/d, followed by a 24,000-b/d loss in the Bakken to 1.1 million b/d and 23,000-b/d loss in the Niobrara to 371,000 b/d.

“Companies have to be prudent in the face of what’s happening,” says Daniel Yergin, vice-chairman of consultancy IHS. “It’s a wrenching period for the industry.”

Natural gas demand is expected to rise to 199 billion cubic meters in 2016, Zhu Fang, head of market information department at the China Petroleum and Chemical Industry Association told Reuters after a media briefing by the association on Tuesday in Beijing.

Oil companies including Royal Dutch Shell and Chevron have already slashed tens of thousands jobs globally to deal with a near 75 percent drop in oil prices since June 2014 that has seen earnings collapse.

Crude's collapse from $100 a barrel since mid-2014 has already pummeled Russia, which relies on energy for about half its budget revenues and 40 percent of its exports. The latest slide compounds the problems facing President Vladimir Putin ahead of elections in 2018.

"We are certain the Chinese economy will grow only slowly and that the yuan will depreciate in 2016," said a senior trader with a Shanghai-based fund. "The biggest uncertainty we have is how much the yuan will depreciate, which could revalue metals in China and affect our bets."

The escalating rivalry between Saudi Arabia and Iran is intensifying bilateral market competition, which some observers say eclipses in importance Saudi concern over expansion of supply from North America.