Oil Prices Take a Tumble: In the fast-paced world of oil markets, Wednesday saw a continued descent as prices plunged by over 3%, reaching lows not seen in six months. Brent crude futures for February slipped by 0.45%, settling at $72.91 a barrel, while U.S. West Texas Intermediate crude futures for January dipped by 0.42%, closing at $68.32 a barrel.
The downward trajectory gained momentum overnight, fueled by stronger-than-anticipated U.S. inflation figures for November. This bolstered the belief that the Federal Reserve would likely refrain from early interest rate cuts in the upcoming year, potentially impacting consumption. On another front, ANZ analysts noted a surge in the weekly average of Russian crude exports, raising concerns about oversupply and casting doubt on the recent output cut agreement by OPEC+.
Adding to the bearish sentiment, the U.S. Energy Information Administration revised its supply forecast for 2023 upward by 300,000 barrels per day to 12.93 million barrels per day in its latest Short-Term Energy Outlook report. This gloomy outlook sets the stage for oil to continue its decline, marking the seventh consecutive week of losses.
Also Read: Asian Markets Await Fed Final Act of 2023: Oil Prices Slip to 6-Month Lows
As the oil market navigates these turbulent waters, all eyes turn to the U.S. central bank’s policy meeting concluding later on Wednesday. Analyst Tina Teng from CMC Markets suggests that a more hawkish-than-expected stance by the Fed could trigger further drops in crude prices. Market strategist Yeap Jun Rong at IG highlights the anticipation of “aggressive rate cuts” for 2024, a sentiment largely priced into the markets. Any deviation from this expectation could strengthen the U.S. dollar and weigh on the risk environment, consequently pushing oil prices down, warns Yeap.
DBS analyst Suvro Sarkar downplays expectations of surprises from the Fed discussions and suggests that prices might experience a modest rebound in a “relief rally” post-meeting. On a global scale, geopolitical tensions also play a role in the oil market saga. The United Nations passed a resolution calling for an immediate ceasefire in Gaza, with President Joe Biden cautioning that Israel’s actions risked eroding international support. Additionally, shipping costs through the Red Sea are on the rise due to increased attacks by Yemen’s Houthis on ships linked to Israel. This has raised concerns about disruptions to global shipping, further adding to the complexities impacting oil prices.
As COP28 nears its conclusion, governments remain entangled in discussions over the future of oil and fossil fuels. China’s former vice minister Liu Zhenmin acknowledged lingering sticking points in negotiations, emphasizing the need for resolutions amid criticism over the draft deal’s failure to call for a fossil fuel phase-out. In a landscape where every development reverberates through the market, the oil industry faces a challenging path forward, navigating uncertainties both on the economic and geopolitical fronts.
Our Reader’s Queries
What is going on with oil prices today?
As of 9 a.m. ET today, the WTI futures are trading at $71.25 per barrel, which marks a 2.92% decrease in the past 24 hours.
How much is the price of oil per barrel today?
The latest market update shows that WTI Crude is currently at 71.65, down by 0.12, while Brent Crude is at 77.04, down by 0.11. Murban Crude is also down by 0.14, currently at 76.97. Natural Gas is at 2.514, down by 0.043, and Gasoline has increased by 0.007 in the last three days, currently at 2.106.
Who can produce oil the cheapest?
It’s worth noting that the leading OPEC+ producers have the most cost-effective operations globally. Countries like Iran, Iraq, and Saudi Arabia can produce a barrel of crude oil for as little as $10 or less.
Why oil prices are dropping?
On Tuesday, oil prices dropped by over 3%, hitting their lowest point in six months. This was due to concerns about oversupply and an unexpected increase in consumer prices according to recent U.S. economic data.