Oil prices saw another bearish week, falling to their lowest since September 2010. A combination of factors pushed WTI crude below, and brought Brent close, to $75 per barrel. This marked a ~30% decline in the benchmarks from their June highs.
Why the bear won’t let go
Crude prices started the week on a firm footing with a bit of bullish news that two of Libya’s major oil fields had to be shut down after being attacked by gunmen. However, claims by the National Oil Company that production would resume by Wednesday kept a lid on prices.
Things only went south from there. A strong dollar and a raft of bearish new flow—mainly from China, pointing to a rapidly slowing economy—kept pushing prices lower despite tensions flaring up in Ukraine and talks with Iran seemed bleak.
Comments by OPEC (the Organisation of the Petroleum Exporting Countries) members clearly show no inclination to support prices by way of production cuts at the upcoming bi-annual meet on November 27. These comments didn’t help the situation.
Instead, following Saudi Arabia’s price cuts to crude sold to the US last week, which saw WTI break the $80 mark, Iraq cut prices for crude delivered to the US too.
Then, OPEC announced that it estimated the world would need ~1 million fewer barrels of its crude next year. The EIA also cut its US and international liquids demand estimates in its latest monthly report.
Finally, towards the end of the week, the EIA dealt a big blow to prices. It reported that domestic production exceeded 9 million barrels a day, and that Cushing inventories jumped by a massive 1.7 million barrels.
Brent buckled particularly sharply on the news—to close below $80 for the first time in more than four years. This fall caused the WTI-Brent spread to narrow to -$3.5 per barrel from well in excess of $5 per barrel just a few days back.
Watch this space for what happens next week. In the meanwhile, check out our Energy & Power page.