Crude Weekly Plunge: Even though oil prices seemed to be getting better on Friday, they were still close to their biggest weekly drop since March. This was all part of a complicated and tumultuous dance. The U.S. bond market’s tumultuous sell-off and worries about a sharp decline in fuel demand and the state of the world economy stole the show.
In the week before, both WTI and Brent hit their best levels since 2023. Since then, they have both fallen back to earth, with WTI falling by about 9% and Brent by an incredible 11.6%.
Bond investors’ fears, worsened by rising government spending and a growing budget deficit in the United States, which uses the most oil, caused a large sell-off. Because of this, Treasury prices fell to a level they hadn’t been at in 17 years. Brent futures had gotten back on their feet. They were up 0.3% and stood at $84.33. At the same time, the price of U.S. West Texas Intermediate oil futures levelled off at $82.59, up 0.3%. This slight rise came after an actual drop of 2% on Thursday.
Edward Moya of OANDA said that oil prices were showing signs of stabilization. They made it through the week’s storm while the bond market was in a constant storm that made people worry about the state of the world’s economy. Moya said that the worst week for crude since March is starting to bring in buyers. This is because the oil market was thought to stay tight in the short term.
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In a detailed, cautiously optimistic note, JPMorgan said that oil demand would be strong but slow to grow in the fourth quarter of 2023. The National Australia Bank also thought the market would be in deficit this quarter and that the recent price drop was just a temporary glitch.
On Friday, the Commonwealth Bank of Australia wrote in a detailed note, “We think that as markets turn their attention to the shrinking global oil stockpiles, Brent oil futures will inevitably gain ground and probably go above $US90/bbl.”
This week, data from the American government showed that the gasoline demand had dropped sharply. This was in line with economic signs that showed a noticeable slowdown in the services sector. At the same time, a critical study showed that the euro zone’s economy may have shrunk in the last quarter. This was made worse by a strong dollar, making it harder for countries worldwide to buy things.
As Friday got closer, everyone was waiting for the monthly jobs report for the United States, which is a crucial sign of how well the economy is doing. Tina Teng, an intelligent analyst at CMC Markets, says it’s impossible to overstate the importance of tonight’s non-farm job data, the U.S. CPI and the economic data from China next week when figuring out where oil will go. An economic solid front can give the picture of demand a brief glimmer of hope.
Our Reader’s Queries
Why are oil prices plunging?
The continuous decline in oil prices is causing concern among analysts who fear the impact of increased production worldwide. Despite the promises made by the Organization of the Petroleum Exporting Countries to limit supply, the market seems to be ignoring their efforts. This situation is causing a prolonged drop in oil prices, which is worrying for the industry.
Why crude is going down?
According to Omkar Kamtekar, a Research Analyst at Bonanza Portfolio Ltd., the global growth forecast for 2023 is 3.0 per cent, with a slight decline to 2.7 per cent in 2024. This is a drop from the 3.0 per cent forecasted in July. The decrease in crude oil prices can be attributed to the economic slowdown and recessionary fears.
Will oil prices go up in 2023?
In 2023, the average price of Brent crude oil was $83 per barrel, which is a decrease of $19/b from the previous year’s average of $101/b. This shift in price can be attributed to changes in global trade dynamics, as crude oil from Russia found new markets outside of the EU. Additionally, global demand for crude oil did not meet initial projections.
What time is the weekly oil inventory report released?
Every Wednesday at 10:30 AM EDT, the EIA unveils its weekly Crude Oil Inventory Report for the previous week ending on Friday. The report predicts inventory levels by analyzing the “tightness” or “looseness” of observed storage compared to the 5-year average storage over the preceding 4 weeks. This measure helps to provide a clear picture of the current state of crude oil inventory levels.