Oil prices plunged on Wednesday (17), pushing major benchmarks to their lowest closing levels since early October, after OPEC and the International Energy Agency warned of impending oversupply and rising oil prices. Covid-19 cases in Europe have increased downside risks for demand recovery.
Brent oil futures retreated 2.61% to $80.28 a barrel. US oil futures (WTI) closed at $78.36, down 3%.
The declines pushed Brent to its lowest close since Oct. 1 and US Crude Oil to its lowest close since Oct. 7th.
Traders say recent market action suggests funds are weighing an increased likelihood that supply will start to outstrip demand in the coming months, with sharp declines in short-term futures pointing to funds closing out long.
“This signals a move toward balance that we haven’t seen for many months,” said Tony Headrick, energy analyst at CHS Hedging.
The global oil market has focused on rapidly increasing demand against a slow increase in supply from the Organization of Petroleum Exporting Countries and its allies, along with the reluctance of major US shale players to spend too much on exploration.
However, both the Energy Agency and OPEC said last week that more offers could be coming in the coming months. OPEC and its allies, known as OPEC+, have kept an agreement to increase production by 400,000 bpd every month so as not to overload the market with supply.
Reference: CNN Brasil