Menu

Search

  |   Commentary

Menu

  |   Commentary

Search

FxWirePro: Oil price breaks into new post-production deal low as growth concern clouds outlook

Both Global benchmark Brent and North American benchmark WTI are plunging into a new post-production agreement low as investors remain concerned over growth outlook affecting overall demand, while supplies are set to creep higher.

As of today, WTI is trading at $49 per barrel, the lowest level in 14 months, while Brent is trading at $58.6 per barrel, yet to break the post-deal low.

Here are the key factors affecting the oil price,

  • OPEC members and non-OPEC countries led by Russia have agreed to reduce oil supplies by 1.2 million barrels per day, which is exerting some bullish pressure on oil, however, investors remain concerned over the cartel’s ability to push prices higher as many members like UAE, Russia, and Saudi Arabia have sharply increased production since June this year, when oil price was hovering around $80 per barrel.
  • Despite OPEC agreement, hedge funds have been steadily reducing bullish bets on oil. According to Commitment of Traders (CoT) report published by CFTC, Speculators reduced long positions for the 11th Consecutive week and for the 21st time in 25 weeks, and by 20,640 contracts, which brought the net positions to +309.5K contracts. Speculative long positions reached a record high of 739.1K contracts in February this year and have been declining since.
  • The latest numbers from China point to a continued slowdown in the domestic market as well as international orders and retail sales growth declined to 8.1 percent y/y in November, the slowest pace since 2003, and industrial production growth declined to 5.4 percent y/y, the slowest pace since 2003. China is the world’s biggest importer of crude oil.
  • The United States, which was the world’s largest importer a few years back, is a net exporter of oil and products.
  • The Fracking technology is transforming the supply side of the oil market.
  • In the latest round of data, both the United States and Europe have shown signs of a slowdown.

We expect the oil price to remain in the bearish territory heading to the end of the decade.

 

  • Market Data
Close

Welcome to EconoTimes

Sign up for daily updates for the most important
stories unfolding in the global economy.