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Peter Davis

An writer at FOMOdrive

  • Oct 05, 2023
  • 2 min read

Oil plummets to record level for the year

On Wednesday, oil prices experienced the largest drop since September of the previous year.

After the weekly data on US oil inventories was released, the decline quickened.

The OPEC+ meeting did not offer any assistance to oil prices.

For the past five days, oil has been decreasing in value, with a drop of approximately $10.

On Wednesday, WTI oil prices dropped by more than 5.5%, reaching their lowest point since early September at $84. This decline is attributed to worries that the current economic issues and high rates could lead to a decrease in demand.

On Wednesday, oil prices dropped further following the release of the weekly data on crude oil and petroleum product inventories from the US Energy Information Administration (EIA). The data showed that while US oil inventories decreased by 2.22 million barrels, gasoline inventories rose significantly (+6.48 million barrels).

Gasoline inventories saw their highest weekly increase since January 2022 last week, as reported by Bloomberg. Furthermore, the four-week average of implied gasoline demand dropped to its lowest point in 25 years for this period.

On Wednesday, OPEC+ chose to keep the terms of the agreement unchanged. Russia and Saudi Arabia maintained their commitment to voluntarily cut down on exports and production.

The FxPro analyst team notes that the global economic slowdown and decrease in final demand are having a negative effect on oil. Additionally, there was an indication that oil exports from Russia and Saudi Arabia increased last month, which is reducing the market deficit and making it unclear if the production ceiling set by the cartel is still in place.

Investec notes that the market's focus has shifted away from the short-term oil shortage to two other issues: the effect of high rates on the economy and OPEC+'s reaction to this, as well as the organization's decisions at their upcoming meeting on November 26.

The FxPro analyst team has noted that oil could potentially go below the $84.4 area on WTI, where the 50-day moving average is located, as well as the price peaks in early August and mid-April. They have also suggested that more solid support may not be seen until a decline to $78, where the 50-week moving average passes. However, they would not be surprised if the price reaches $75 by the end of the year.

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