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Peter Davis

An writer at FOMOdrive

  • Nov 07, 2023
  • 2 min read

Oil fell to record levels over the past month

On Tuesday, oil prices experienced their largest drop in nearly five weeks.

Futures are being sold off by investors as the potential risks in the Middle East have decreased.

Once again, the dangers of decreasing worldwide demand are becoming more apparent.

On Tuesday, WTI oil prices dropped to 3.5-month lows of around $77, a decrease of more than 4%. Additionally, Brent quotes fell to their lowest point since July's end, around $81.50.

The price of oil has decreased as worries that the dispute in the Middle East could spread and lead to supply issues have been allayed.

So far, the announcement on Sunday of Russia and Saudi Arabia extending oil production cuts until the end of the year has not had a positive effect on prices.

Bloomberg is reporting that the possibility of a decrease in worldwide energy consumption is once again being discussed due to the economic downturns in China and Europe.

Reuters reported that China's oil imports rose significantly in October compared to prior months, yet the nation's total merchandise exports dropped more quickly than anticipated. This decrease has a worldwide economic impact.

The anticipated decrease in oil refining amounts at Chinese refineries in November-December could potentially restrict oil consumption and worsen the decline in commodity prices.

The slowing economy in Europe is having a negative impact on manufacturing, resulting in a decrease in the demand for fuel.

Saxo Bank has stated that the chances of the conflict in Gaza escalating to the oil-rich areas of the Middle East are highly unlikely, despite the increasing number of fatalities from Israeli airstrikes.

Promsvyazbank notes that the geopolitical premium was removed too soon, as the potential for an intensification of the dispute in the Middle East has not yet been eliminated.

The FxPro analyst team has noted that the current situation is now in favor of the bears, as many major economies around the world are either slowing down or already in a recession. With interest rates beginning to take effect, it is unlikely that governments will be able to provide stimulus to help the oil market grow, as they are now focused on combating inflation.

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