Oil Prices Slide 1Percent: Oil prices went down by about 1%. This was because of the pull of a stronger U.S. dollar, rising U.S. bond yields, and a dissonant symphony of different supply signs.
The price of Brent futures for delivery in December decreased by 99 cents, equal to a drop of 1.09%. They ended up at $89.72 per barrel. U.S. West Texas Intermediate crude (WTI) did a turn at the same time as it fell 78 cents, or a tiny 0.88%, to finish at $88.04 per barrel.
In this story, which was mostly about oil, Brent crude oil was at the centre of the trouble when its price dropped to a tempting $90 per barrel. In a client note, the ANZ experts who wrote the market sentiment report said that the rise in U.S. yields and the strength of the U.S. dollar were to blame for this drop.
The supply stayed tight as the world waited for this financial dance. Still, the rise in loan rates had a harmful effect because it made it more expensive to store inventory. This scary article talked about a situation called “destocking,” in which oil inventories would go down while spot supply went up.
The dollar hit a soaring 10-month high compared to its main competitors. The fact that there wasn’t a partial government shutdown and the flood of economic data made people even more excited. Many people thought the Federal Reserve would keep rates high for a long time, which could have stopped the economy from growing.
When interest rates go up, and the dollar gets stronger, oil becomes more expensive for people who use currencies other than the dollar. There is a heavenly arrangement of economic forces that could stop the world from wanting more and more oil.
In a global speech, Turkey’s energy minister talked about restarting a pipeline from Iraq that had been shut down. This news made oil prices even less clear, and it was put on hold for six months, making the shadow of doubt even longer.
OPEC+, the alliance of the willing that includes OPEC, Russia, and other ally groups, is getting ready for an upcoming meeting. A meeting where the output settings are expected to stay the same, keeping the strings tight and the range of sources small.
The market analysts at BMI Research thought the group would try to keep making cuts even though the global economy was worsening. Standing firm against the waning tides of economic vitality while quietly hinting at the chance of even deeper cuts if market forces require them.
A Reuters study says Saudi Arabia is a big player in this economic opera and is ready to raise the official price of Arab Light crude sold to Asia for the fifth month in November. Every word said in this play sends shockwaves through the world economy as oil prices swing back and forth to the music of geopolitical orchestrations and financial manoeuvres.
Our Reader’s Queries
Are oil prices expected to drop?
The US Energy Information Administration has recently revised its crude price forecasts for 2024, predicting a decrease of 8 cents/b to $77.99/b for WTI and $82.49/b for Brent. The agency also anticipates a further decline in prices in 2025 due to an increase in production that surpasses demand.
What is the oil outlook for 2023?
The decrease in oil inventories is expected due to the OPEC+ production cuts announced on November 30. As a result, we predict that the Brent price will rise from an average of $78/b in December 2023 to an average of $83/b throughout 2024.
Why are oil prices slumping?
Despite hopes of an early cut to US interest rates being dampened, stock markets largely rose on Monday. However, concerns of oversupply caused oil prices to slump, with US and European oil futures falling around four percent. This was due to top exporter Saudi Arabia cutting the price of its crude, which also had a negative impact on shares of energy majors. Analysts have noted the potential impact of this move on the global oil market.
Why is oil price crashing?
The recent drop in US and Brent crude oil prices to $69 and $74 a barrel, respectively, can be attributed to the combination of uncertain demand and the booming production in the US.