Connect with us

Business Insights

Oil Prices Plunge Over 5% Amid Global Demand Concerns

Oil prices dropped by more than 5% on Thursday, reaching their lowest level in four months.

Oil prices experienced a substantial drop of more than 5% on Thursday, marking their lowest point in four months. 

The primary driver behind this sharp decline was investor apprehension concerning global oil demand, prompted by lackluster economic data from the United States and Asia.

Brent and WTI Hit Lowest Levels Since July 7:

Brent futures fell by $4.38, a significant 5.4% drop, reaching $76.80 per barrel by 1:02 p.m. EST. 

Concurrently, US West Texas Intermediate crude (WTI) experienced a comparable decline of $4.27, or 5.5%, settling at $72.39. Notably, both contracts reached their lowest points since July 7.

Adding to the concerns, WTI and Brent’s front-month contracts dipped below the prices for the second month, establishing a contango structure. 

Analysts note the prevailing negativity, with Phil Flynn from Price Futures Group stating, “The mood is negative, the charts are negative.”

US Economic Indicators Highlight Concerns:

The escalating worries were exacerbated by a surge in Americans filing new lawsuits for unemployment benefits, reaching a three-month high. 

This signals a potential easing of labor market conditions. Additionally, recent data revealed a decline in US retail sales for the first time in seven months, indicating a slowdown in demand at the beginning of the fourth quarter.

While OPEC and the International Energy Agency (IEA) forecasted supply tightness in the fourth quarter, US data contradicted these predictions, revealing abundant inventories. 

The discrepancy in reports contributes to the overall uncertainty in the market.

Chinese Economic Indicators Add to Market Jitters:

Expectations of a slowdown in Chinese oil refinery throughput further fueled investor concerns. 

October witnessed a reduction in runs compared to the previous month, influenced by weakened industrial fuel demand and narrower refining margins. 

Despite this, Chinese economic activity exhibited resilience in October, with increased industrial output and retail sales growth surpassing expectations.

Tamas Varga of oil broker PVM noted that the current price drop occurs against a seemingly positive backdrop. 

Investors appear skeptical of the ‘Q4 stock draw’ narrative, especially considering recent weekly EIA reports that do not fully support this expectation.

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Trending