Oil markets weak as global supply seen ahead of demand

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Supply of Oil

There was a significant decrease in the price of oil this Friday; it was the recorded drop which made the price of oil the minimum for the year. This was the most significant monthly decline seen since 2014. The oil producers tried to cut the production costs of the oil in the hope to move up considerably towards the world’s surplus which is continuously on the rise. There is a rapid growth in the oil supply by the United States. The supply of oil is more than its demand which is asking a cut off in the amount of the unused fuel similar to the one that was seen emerging in the year 2015. It is expected that a meeting will be held on the 6th of December this year to withhold the output by the Organization of the Petroleum Exporting Countries.

Price of Oil

The price has been raised to a small extent through this act as the valuation for one barrel oil has dropped on a significant percentage of 20 till November with a consecutive seventh-week loss in a row. The drop of the barrel prices for oil was seen for the Benchmark Brent which decreased by $2.31 accounting up to 3.7 percentage decrease per barrel. The prices counted as low as $60.29 which is the lowest recorded price for a barrel since November 2017.

WTI (U.S. West Texas Intermediate)

WTI (U.S. West Texas Intermediate) suffered a loss of $2.90 per barrel which accounted up to 5.3 percentage decrease as the barrels sold for only $51.73. The main question that is arising is how long the conditions are going to stay the same. The picture of the demand and supply is now being compared with the rates of the supply that was seen four years ago from now. This is recorded since the last November and December of 2014 when the prices decreased to this percentage as of now.

The hike in volatility is the highest since the year 2016 as all the investors are rushing towards buying the protection against any further downfall and declining prices. Volatility is the particular option that the investors take to measure their demands, and this has been hiked to around 60% of the selling options which is now counted twice of what it was two weeks back. The supply of oil has a surge for the present year. The non-OPEC output is expected to rise by The International Energy Agency by 2.3 M bpd in the present year which is going to get way higher than what it was six months ago; i.e., 1.8 M bpd.
The demand for oil is expected to rise as per the forecast in the upcoming year at a rising rate of 1.3 M bpd as compared to its 1.5 M bpd that was six months earlier. Saudi Arabia, the top exporter of oil, said that it could significantly reduce the supply of oil to adjust the lower rate of demand which pushed the OPEC to agree for joint output schemes of cutting down 1.4 M bpd.

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