IMPORTANT POINTS:
- US crude fell almost 5% this week, and Brent fell almost 4%, despite tensions in the Middle East.
- Saudi Arabia plans to increase its oil production this year, which could keep prices lower for longer.
- Weak demand in China has weighed on the oil market, with recent economic stimulus still showing clear signs of recovery.
The price of US crude oil ended the week with a significant drop, influenced by reports showing an increase in production from Saudi Arabia. This put China’s efforts to revive its economy on the back burner.
WTI and Brent fall
West Texas Intermediate (WTI), the US crude oil benchmark, has fallen about 5% in the past few days. For its part, Brent, a global benchmark, fell by almost 4%. These reductions came even as the conflict in the Middle East escalated, with Israel launching airstrikes in Beirut targeting Hezbollah leader Hassan Nasrallah.
Dan Yergin, vice president of S&P Global, said on CNBC:
“It is surprising to see that the war does not affect the price of crude oil, and that is because there has been no interruption in supply.”
And he said that “there is still more than 5 million barrels per day of idle capacity in the Middle East.”
Final energy prices on Friday
At the close of trading on Friday, oil and other energy prices were as follows:
- West Texas Intermediate (WTI)
November contract: 68.18 dollars per barrel, down 51 cents (0.75%). So far this year, US crude has fallen nearly 5%. - Brent
The November contract: 71.98 dollars per barrel, down 38 cents (0.53%). So far this year, Brent has lost more than 6%. - Gasoline RBOB
October contract: $1,953 a gallon, down 0.42%. So far in 2024, gasoline has fallen 7%. - Natural gas
November contract: $2,902 per thousand cubic feet, up 5.41%. In the year, natural gas has increased by more than 15%.
Saudi Arabia increases production despite falling prices
Crude oil prices fell sharply on Thursday after reports that Saudi Arabia plans to increase its oil production by the end of this year. This, even if it causes a long fall in prices.
OPEC+ delayed a planned production increase from October to December. However, some analysts believe they could delay the increase even further, given current market conditions and low oil prices.
Demand from China, a key factor
The oil market lost the momentum gained earlier in the week after China announced a new economic stimulus package. Low demand in the Asian country is a constant pressure on crude oil prices.
Yergin explained:
“The biggest factor is weakness in China. For years, half of the growth in global oil demand has come from China, but that hasn’t happened recently.”
Finally, Yergin questioned whether economic stimulus measures in China will succeed in driving a recovery:
“The big question for the market is whether we will see a proper recovery in China after the stimulus,” he said.
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