Quicktake: Why are oil prices plunging?

Daniel Fowler
November 14, 2018

He said emerging concerns about weak global demand, rising USA production, and speculators rapidly bailing out of long positions were primary factors for the drop.

Non-Opec oil supply will surge by 120,000 bpd next year and the US, Canada, Kazakhstan and Russian Federation will lead the group of countries contributing to this increase.

Global benchmark Brent crude oil futures were down 9 cents at $65.38 per barrel.

WTI (oil futures on NYMEX) caught a fresh bid-wave and broke the downside consolidation phase, bouncing almost $ 1 on the latest reports that the OPEC and its allies are reportedly discussing oil supply cut of 1.4 million barrel per day (bpd).

Opec now expects world demand to grow 1.29m barrels a day next year, about 70,000 barrels a day lower than last month's forecast.

Oil prices hit its lowest point since December 2017 on Tuesday, following anticipated oversupply in the global crude oil market.

Given that, I would still expect oil to weaken ahead of the December OPEC+ meeting in Vienna until rumours of real production cut values are being reported in the media.

It added: "Non-OPEC oil supply growth in 2018 is estimated at 2.31 mb/d, an upward revision of 0.09 mb/d from the previous month's assessment".

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Brent Crude is not down more than 20 percent from its recent high, officially putting it in bear market territory.

Saudi Arabia is the largest member of the Opec cartel of Middle East and African oil producers.

But Trump has made it clear he wants oil prices to fall. He said there was now an oversupply of oil, leading to plummeting prices, and that the kingdom would curb its output to stabilize the market.

Spot prices in September were significantly higher than those for later delivery, a structure known as backwardation that implies a tight market as it is unattractive to put oil into storage. In July, Trump called the organization a "monopoly", warning on Twitter that "gas prices are up & they are doing little to help".

In addition to Trump's tweet, the price of oil has come under pressure because of fears that weakening economies outside of the US could diminish demand. Brent (LCOc1) dropped $2.96, or 4.2 percent, to a low of $67.15 a barrel.

The latest drop in price comes after US President Donald Trump tweeted on Monday that he hoped there would be no oil output reductions, after Saudi Arabia said on Sunday that Opec was considering cutting supply next year.

Demand for its crude will be about 31.5 million bpd, which is 500,000 bpd less than its forecast two months ago and 1.4 million bpd below current output, Opec said this week.

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