Oil prices which jumped last week by around three to four percent reversed their gains at the beginning of this week due to growing concerns regarding a sudden oil buildup as well as the rise in the U.S. production that has sent oil prices down during the past couple of months.
Although the Organization of Petroleum Exporting Countries extended its agreement to cut output until early next year sending oil prices above the $50-$55 per barrel level during the past couple of weeks, market concerns regarding the long bullish run of crude oil prices as investors awaited any possible factors that would lead prices to sharply take a downward turn.
In Asia, oil prices were down after oil prices edged down due to various analysts forecasts for oil production numbers in the U.S. Crude futures on the New York Mercantile Exchange inched 0.7% lower during Wednesday’s trading session to $50.05 per barrel. In London,
According to official data released by the Energy Information Administration on Wednesday, crude oil inventories were down by 467,000 barrels with distillates expected to decline by more than 1 million barrels. However, gasoline stocks have risen by 867,000 barrels.
Crude oil prices have started to trade lower starting Monday through Wednesday as the markets awaited the weekly inventory report which will show whether crude oil supplies have fallen or have risen. Due to market concerns regarding inventories suddenly rising, oil prices lost its winning streak from the previous week. Other analysts have also warned against U.S. drillers suddenly increasing activity due to the recent bullishness of oil prices.
Illustrated below is the movement of oil prices in the past months. After the end of the initial OPEC agreement showed weak results a few months ago along with the sudden rise of oil inventories in the United States, oil prices dipped to as low as $40 per barrel before it recovered due to various reports of renewed demand in countries such as China and sudden decline in U.S. crude inventories.
However, a sudden rise in U.S. production at around August offset those gains once again where oil prices hovered around $47 per barrel before the market optimism that the OPEC would extend its agreement to cut its output until next year. Oil prices then rallied by as much as $59 per barrel during last week. At the beginning of the week, oil prices started to slide as the markets start to raise their concerns regarding the crude oil’s bullish run.
Brent crude futures were down by 0.2% on Wednesday to $55.53 per barrel from having previously dipped by more than 2% on Monday. The U.S. West Texas Intermediate was also down to $50.10 per barrel.
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