Source: Wall Street News
Both US oil and oil hit their lowest levels since December 2021, and Brent crude oil fell below the $70 mark. Adequate supply in the crude oil market, demand concerns, and speculative short selling are rampant, all causing oil prices to plummet in this round.
On Tuesday, WTI crude oil fell about 5% during the day to $65.27 per barrel, a new intraday low since December 2021. Brent crude oil fell 4.4% during the day, falling below $69. This is the first time since December 2021 that it has fallen below the $70 mark per barrel.
By the close of trading on Tuesday, the decline in oil prices had narrowed slightly. WTI crude oil futures for October closed down $2.96, or 4.31%, to $65.75 per barrel. Brent crude oil futures for October closed down $2.65, down 3.69%, to $69.19 per barrel.
Financial blogger ZeroEdge discovered that every day recently, oil prices have been falling in waves at 10 a.m. EST.
Adequate supply in the crude oil market, demand concerns, and speculative short selling are rampant, all causing oil prices to plummet in this round.
Demand concerns
On the same day, OPEC once again lowered its forecast for global oil demand growth in 2024 and 2025. OPEC predicts that global oil demand will grow by 2.03 million b/d this year and 1.74 million b/d in 2025, lower than the previous forecast of 2.11 million b/d and 1.78 million b/d. Although OPEC lowered its demand forecast for the second time in two months, its forecast for global oil demand this year is still far higher than other forecasting agencies.
Recently, several US economic data have shown a weak trend. The Eurozone manufacturing PMI continues to shrink, and market concerns about the economic recession have intensified. Combined with the import and export data released by China on Tuesday, it has raised market concerns about oil consumption demand.
News on Friday showed that Saudi Arabia cut the price of its flagship crude oil in major Asian markets in October, which is also a sign of weak demand.
Adequate supply
Although OPEC+ has reached a consensus to postpone the implementation of the plan to increase oil supply again by two months, production surged in oil-producing countries outside the organization, exacerbating the oversupply situation.
U.S. crude oil production has been rising, weakening OPEC+'s efforts to curb supply. Macquarie expects U.S. crude oil production to reach a record 13.9 million b/day in 2024, and drilling efficiency in the Permian and Bakken basins will be even higher. According to data from Baker Hughes, there has been a slight increase in the number of crude oil drillings since hitting a low point in July.
speculative short selling
Currently, extreme pessimism about declining oil prices looms over Wall Street, and Goldman Sachs, Damo, Citibank, and HSBC are all bearish. Even long-time bull-headed Tock groups rarely warned. Wall Street generally believes that there will be a serious oversupply of crude oil in 2025, and oil prices may drop to the level of 60 US dollars at that time. OPEC+ agreed to suspend production increases or to support oil prices for a short time, but bears now take the lead, and the rebound in oil prices is weak.
Hedge funds have once again begun to drastically cut their bullish oil bets, and net long positions have fallen to an all-time low. However, some analysts indicate that this is an inverse indicator, which usually indicates that the market has bottomed out in the short term.
According to energy expert John Kemp, in the seven days up to September 3, hedge funds and other fund managers sold 0.117 billion barrels of crude oil in the six most important futures and options contracts. Total holdings fell to just 93 million barrels, the lowest level in at least a decade.
It should be noted that the above position report was released two days before it was reported on September 5 that OPEC+ would postpone the original production increase plan. However, OPEC+'s delay in increasing production did not stop the downward trend in oil prices.
The US government lowered oil price expectations and raised production expectations
The US Energy Information Administration (EIA) released a short-term energy outlook report on the same day, lowering the oil price forecast for this year and next two years:
The price of Brent crude oil is expected to be $83 per barrel in 2024, compared to the previous forecast of $84 per barrel. The price of Brent crude oil is expected to be $84 per barrel in 2025, compared to the previous forecast of $86 per barrel.
WTI crude oil is expected to be $78.8 per barrel in 2024, compared to the previous forecast of $80 per barrel. WTI crude oil is expected to be $79.63 per barrel in 2025, compared to the previous forecast of $81 per barrel.
The EIA expects US oil production to reach 13.3 million b/d in 2024, compared to 13.2 million b/d; production is expected to be 13.7 million b/d in 2025, which is the same as the previous forecast.
Editor/jayden