The oil market remains in the red zone. Given recent losses, a drop in the oil prices is starting to look like panic selling. As a result, US oil futures showed their lowest in almost a year, plunging by about 7%. WTI oil (USOIL) set a new record, keeping its decline for 12 consecutive sessions. Such an aggressive downward trend in the US oil hasn’t been observed since 1983, that is, since the first records.
Trump’s comments seem to have affected the oil industry much more than it had been expected. Last week he tweeted that OPEC and Saudi Arabia “must get prices down”, voicing his disapproval over potential production cut. These comments ruined buyers’ expectations, who had been already prepared for growth amid the news that Saudi Arabia would reduce its oil production by 500 thousand barrels in December. These are not the only factors U.S manipulation aimed and bringing oil price down.
Last week, Trump renewed the US Iran sanctions, temporarily giving waver to some countries, allowing them to keep purchasing oil from Iran. These countries are China, India, Italy, Greece, Japan, South Korea, Taiwan and Turkey. Trump’s decision clearly proves that the US doesn’t intend to cut the export of Iranian oil to zero. Trump is well aware, that if he did not make these concessions, oil prices would continue to renew the perennial highs. oil prices would continue to rewrite perennial highs the American president in lower petroleum prices, such decision is quite reasonable.
Another factor that caused the decline in oil prices is the underestimated risk of growth in global supply. Energy Information Administration reported that oil production in the United States for the week ending November 2 increased by 400 thousand barrels per day, reaching 11.6 million barrels. Saudi Arabia crude oil production volume, according to S&P Global Platts, rose to 10.67 million barrels in October, its most in the 30-year history of the Platts OPEC survey. As for Russia, the third key oil producer in the world, Bloomberg estimated its oil production at a post-Soviet maximum of 11.4 million barrels per day. Just these three countries alone produce more than 33 million barrels per day.
This figure contrasts sharply with the OPEC forecast from January 2018, which expected these regions to account for no more than 31 million barrels of total production per day by the end of 2018. The prospect of declining global economic growth, which will inevitably lead to lower demand for raw materials adds fuel to the fire. In this context, the problem of overproduction becomes urgent, indicating bleak future for oil prices. Considering all the above said, Brent crude may well fall to $ 60 per barrel by the end of 2018.