Crude oil prices crashed yesterday, losing 7 percent in just one day, which was the biggest daily loss in three years and today continued down in early trading as headwinds overwhelmed any bullish factors.
After a rather rocky start to Wednesday trading, oil prices managed to tick upward, with WTI trading at 2.32% by 10:14am EST. Brent had rallied 2.63% to trade at $67.19 at the time of writing, despite pressure by a vicious combination of demand outlook, oversupply concerns and a couple of other factors such as President Trump’s call on OPEC to keep production at current levels.
Trump’s call followed a statement from Saudi Arabia’s Khalid al-Falih that the Kingdom could reduce half a million barrels from its daily production for fear of an oversupply and that OPEC as a whole might reduce production by 1 million bpd. Despite a warning from Russia’s Alexander Novak that hasty decisions are not the smartest ones, the Saudi minister gave a strong signal that the cartel is so worried about the discrepancy between earlier analyst expectations about demand and supply and reality it was ready to act immediately to prop up prices—sentiment that proved moderately successful. Related: Saudis Scramble To Stop Oil Price Slide
At the same time, OPEC revised downwards its global oil demand forecast for this year and next, for the fourth month in a row. The cartel said in its latest Monthly Oil Market Report it expected oil demand this year to rise by 1.5 million bpd, a downward revision of 40,000 bpd from last month’s MOMR. Next year, OPEC sees global oil demand rising by 1.29 million bpd, which is 70,000 bpd less than what OPEC expected last month.
This added insult to injury, after the Energy Information Administration last week reported U.S. crude oil production had hit a record of 11.6 million barrels daily two weeks ago and was on track for further growth this year and next.
Despite today’s partial rebound, crude is now officially in a bear market, having lost 20 percent over a little more than a month thanks to this combination of factors along with the sanction waivers that the U.S. administration granted to eight large Iranian oil importers, pretty much diffusing the bomb of shortage concern that had some analysts forecast Brent at US$100 a barrel by the end of the year.
By Irina Slav for Oilprice.com
More Top Reads From Oilprice.com: