- Oil prices have fallen dramatically in recent trading, with the WTI now at $ 80.00.
- News that nuclear talks between Iran, the EU and the US will restart at the end of the month has exacerbated the slide.
- Oil prices have been falling dramatically in recent trade.
The previous month’s futures contracts for the US benchmark for light sweet crude, West Texas Intermediary O WTI, have fallen back to $ 80.00 per barrel for the first time since mid-October. As it stands, WTI is down about $ 3.0 or more than 3.5% on the day, the biggest one-day percentage drop since early August.
The news that Iran and the EU (and indirectly, the US) will return to the negotiating table regarding the reinstatement of Iran and the US into the 2015 nuclear pact, thus paving the way for the elimination of Sanctions limiting Iranian oil exports is being cited as a weight on price action. The talks will start again on November 29. Iran could increase production by up to 2 million barrels per day if sanctions are lifted, which would help close the current gap between global oil supply and global demand for oil.
A technical sell / run stop may also have contributed to the pace of the recent decline; $ 81.00 was a key support area that had held multiple times over the past two weeks and there may have been a number of stops in the $ 80.00-$ 81.0 0 region that were triggered. Furthermore, when WTI broke below $ 82.00, it appears to have also fallen below a long-term uptrend line, which may have also exacerbated the selling pressure.
Bearish inventory data
Before the acceleration of the sell-off in crude oil markets over the past few hours, prices had already been trading substantially lower that day. Weekly private API inventory data showed a larger than expected rise in crude and distillate oil stocks in the US on Tuesday and official US EIA inventory data on Wednesday confirmed these increases. . According to the EIA, crude inventories increased by 3.3 million barrels. Market commentators said the larger-than-expected build-up in crude oil stocks weighed on crude prices on Wednesday, although it should be noted that, according to the EIA, gasoline stocks fell to their lowest level since 2017. and crude oil stocks at the Cushing Oklahoma storage facility were at their lowest level in three years.
OPEC +
This is indicative of the fact that world oil market conditions remain tight, and world demand is now believed to be back above 100 million barrels per day, while supply remains behind by a few million. barrels per day as OPEC + raises production at a slower pace than the recent recovery in demand. For this reason, some might see Wednesday’s drop in crude prices as a good buying opportunity. But the proximity of the OPEC + meeting on Thursday could keep traders undecided.
The cartel is not expected to give in to international pressure to increase oil production at a faster rate and several oil ministers in member states have indicated that they believe it is appropriate to stick to the current plan whereby production rises to a rate of 400 thousand barrels per day / month. They could cite the recent outbreak of Covid-19 infections (touted as more widespread than at any time since the initial outbreak in 2020), which threatens to send the country back into a national lockdown, as a reason for their focus. cautious.
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