New YorkThe oil market is in the downward phase. The price of American West Texas Intermediate (WTI) oil fell 1.6% to $ 60.67 a barrel on Thursday (about 159 liters), slipping into a bear market.
The US benchmark climbed to a maximum of four years of $ 76.41 a barrel on 3 October. Therefore, the price of crude oil fell by 21% in the month. Bear markets are generally defined as a 20% decline from the highest point in the market.
This is a significant reversal, since only a few months ago some analysts had predicted that it would be possible to reach a price of $ 100 per barrel of oil, especially given the repression of the Trump government on Iran.
The oil collapse was triggered by a combination of factors. The recovery of US production, the softening of US oil sanctions against Iran and the commercial tensions have precipitated the price of oil. Concerns about the slowdown in global economic growth did not only affect the stock market, but also affected raw materials. Investors worry that a slowdown in the economy may affect the demand for energy.
Despite the recent recovery on Wall Street, the price of crude continued to plummet. This is also due to the Trump government's decision to temporarily exempt a number of important buyers of Iranian crude oil from the US embargo. India, China, South Korea, Japan, Turkey, Taiwan, Italy and Greece can now continue to buy oil from Iran. Iran is the fifth largest oil producer in the world. This has greatly reduced the fear of bottlenecks in the supply.
"Let's let some of the oil go to those countries that really need it because I do not want to raise oil prices to $ 100 or $ 150 a barrel, which could easily happen," US President Donald Trump said during a press conference Wednesday Trump claimed that, thanks to him, prices have "fallen very sharply" in recent times.
But the fall in oil prices is also due to Saudi Arabia and the increase in US production, mainly in shale regions such as western Texas and North Dakota. US oil production exceeded 11 million barrels a day for the first time in August. The United States has recently overtaken Russia and Saudi Arabia as the world's largest producer of crude oil.
The spike in production helped to increase inventory. US commercial oil stocks increased by 5.8 million barrels last week and are now three percent higher than the five-year average, according to the US government.
Saudi Arabia is already pumping near record levels and production in the Permian basin in Texas is growing so rapidly that the pipeline capacities are no longer sufficient there. Texas bottlenecks may not be resolved until the second half of 2019.
The bear market for unstable oil investors on Wall Street. The energy sector of the S & P 500 fell by 2% on Thursday.
On Sunday, major producers of crude oil meet in Abu Dhabi. The JMMC Oil Committee regularly reviews the course of the Opec Plus association, which includes members of the Opec oil cartel and other major producers such as Russia.
Experts expect delegates to consider subsidy cuts as a means of raising global oil prices. "With the recent erosion of prices and oversupply that could materialize next year, OPEC is considering the possibility of reducing oil production," said Commerzbank analysts.
Meanwhile, the Wall Street Journal on Thursday reported that a high commission of experts from Saudi Arabia is investigating the potential impact of OPEC's liquidation on oil markets. The research project, however, does not reflect an active debate within the government on whether the kingdom should leave the organization in the short term, the American daily continues. Saudi Arabia has dominated the oil cartel for almost 60 years.