Facebook
Twitter
LinkedIn
Instagram
Youtube

Why are crude prices falling?

Team Veye | 02 Nov 2020

Why are crude prices falling?

Just when the world had started feeling optimistic for Covid-19 to end soon, sudden surge in cases was reported. After seeing the cases dip during June-August, Europe is witnessing a far higher number of cases now. Many other countries are also going through a resurgence.

There is palpable fear that the spread of the pandemic can further dampen the already slowing economic activity. Governments across Europe imposed fresh restrictions recently to curb the spread of the coronavirus.

Reduced industrial activity had adversely affected fuel consumption. With U.S. election this week, markets exposed their anxiety and the Brent crude fell below $38 with WTI at $36, dipping to its lowest since June this year.

Oil prices also slid because of a rise in U.S. crude inventories, amid fears of oversupply and weak fuel demand. This more than expected build in U.S. crude stock came with the receding concerns over supply disruption from Hurricane Zeta.

The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, had planned to raise output by 2 million barrels per day (bpd) in January. However, top producers Saudi Arabia and Russia were in favour of maintaining the group's current output reduction of about 7.7 million bpd into next year. The policy meeting is scheduled to be held over30 November and 1 December.

In the United States, energy companies increased their rig count by five to take the total to 287 in the week to Oct. 23, the most since May this year. Libya's National Oil Corp also indicated that production would reach 1 million barrels per day (bpd) in four weeks, a quicker ramp-up than many analysts had predicted.

Reduced demand in the face of oversupply could further delay the recovery in oil prices.

Disclaimer

Veye Pty Ltd(ABN 58 623 120 865), holds (AFSL No. 523157 ). All information provided by Veye Pty Ltd through its website, reports, and newsletters is general financial product advice only and should not be considered a personal recommendation to buy or sell any asset or security. Before acting on the advice, you should consider whether it’s appropriate to you, in light of your objectives, financial situation, or needs. You should look at the Product Disclosure Statement or other offer document associated with the security or product before making a decision on acquiring the security or product. You can refer to our Terms & Conditions and Financial Services Guide for more information. Any recommendation contained herein may not be suitable for all investors as it does not take into account your personal financial needs or investment objectives. Although Veye takes the utmost care to ensure accuracy of the content and that the information is gathered and processed from reliable resources, we strongly recommend that you seek professional advice from your financial advisor or stockbroker before making any investment decision based on any of our recommendations. All the information we share represents our views on the date of publishing as stocks are subject to real time changes and therefore may change without notice. Please remember that investments can go up and down and past performance is not necessarily indicative of future returns. We request our readers not to interpret our reports as direct recommendations. To the extent permitted by law, Veye Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss, or data corruption) (as mentioned on the website www.veye.com.au), and confirms that the employees and/or associates of Veye Pty Ltd do not hold positions in any of the financial products covered on the website on the date of publishing reports. Veye Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services.